Local franchises outshine foreign competitors: Expert

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)