Local franchises outshine foreign competitors: Expert
JAKARTA (JP): Local franchises posted significant growth this year to outshine foreign franchises, a trend veteran consultant Amir Karamoy predicted would continue into the new year.
Amir said on Thursday the number of homegrown franchises, most of them small and medium-size companies, had grown by 12.5 percent over the past four years. This compares to a some 10 percent drop in the number of foreign-based franchises.
He said Indonesia currently has 43 homegrown franchises, a 19 percent increase from last year's 36.
"I project the same trend will continue into next year," he added.
In comparison, the number of foreign franchises dropped from 73 last year to 69 in 1999. The crisis significantly affected these franchises ability to import raw materials as their purchasing power dwindled.
However, those foreign franchises which were able to adjust their marketing and management in the face of the crisis were able to maintain their market positions.
Meanwhile, domestic franchises attracted local businesspeople because the businesses offered low risk, required less capital and relied mainly on locally procured raw materials.
The interesting part of these growing trends, Amir said, was that non-restaurant franchises such as furniture stores, laundries, beauty salons, car rentals and training and consultation services have flourished.
"This fact discounts the opinion that only food related products can succeed in the franchise business," Amir said.
Such positive growth in local franchises has encouraged state postal firm PT Pos Indonesia, state telecommunications company PT Telkom and PT Astra Otoparts to venture into the franchising business themselves, maybe as early as June next year, Amir said.
In addition, state oil and gas firm PT Pertamina is also sounding out the possibility of establishing a franchise to sell some of its products.
Amir said the prospect for franchises in the country was even brighter with early signs of economic improvement and the increasing purchasing power of Indonesians.
He suggests the government help promote homegrown franchises to help create jobs and boost the country's economic recovery.
"Franchises could be used as a means to boost the role of Indonesians in the economy by encouraging entrepreneurship and nurturing small and medium-size companies.
"The government should therefore help create favorable conditions for homegrown franchises to grow."
He urged the government to review Regulation No. 16/1997 on franchises and Ministry of Industry and Trade Decree No. 259/1997, which he said hampered the development of local franchises with complicated bureaucratic procedures.
He also asked the government to provide financial support for local franchisers and franchisees, such as forwarding low- interest rate working capital.
"Banks do not need to worry about providing loans for franchisees because unlike new companies, franchisees are 50 percent ready to start operation," he said, adding that franchisers could provide recommendations to banks and monitor the progress of their franchisees.
"That way, homegrown franchise could grow and help boost economic recovery," he said. (06)