Local restaurant franchises make big success

T. Sima Gunawan, Contributor, Jakarta

Everybody enjoys good food, which explains why the restaurant business continues to thrive, even during the economic crisis.

This was also what Erliza Hambali, a researcher at the Bogor Institute of Agriculture, had in mind when she decided to get into the restaurant business.

Along with two other women, Fatmawati and Ratna Permanik, she set up PT Ayam Goreng Fatmawati Indonesia in 2000 to manage Ayam Goreng Fatmawati (Fatmawati Fried Chicken) restaurants and sell franchise rights. The business has been successful and there are now 43 outlets with some 500 employees in Jakarta and several other cities, including Bandung and Batam.

"We will open another restaurant in Johor, Malaysia, in the middle of this year," Erliza said, adding that there were also plans to open an outlet in Brunei.

The first restaurant was opened in Bogor in 1990, but it was not until the past few years, when it began to be managed professionally, that the business really began to develop.

The franchising business is indeed enjoying good times. Reports say that from 1997 to 2003, local franchises saw an average annual growth of 17.13 percent. This is higher than the growth of foreign franchises, which was 9.7 percent a year from 2000 to 2003.

The Indonesian Franchise Association recorded that as of August 2003 there were 250 foreign franchisors and 47 local franchisors in the country, mostly in restaurants, cafes, bakeries, education, retailing, laundry and dry cleaning services, hair and beauty salons, health and fitness centers, entertainment, consultancy, photography, real estate and car rentals.

However, the real number of local franchisors could be double as many are not registered with the association.

Among the franchisors are Es Teler -- a pioneer in the local restaurant franchising business, Ayam Goreng Fatmawati, Restaurant Sederhana, Bebek Bali, Wong Solo and Bakmi Japos.

H. Bustaman, the owner of Restaurant Sederhana, which serves traditional food from Padang, West Sumatra, started his business in 1972.

"At that time, I ran a food stall on the side of the road in Benhil (Bendungan Hilir, Central Jakarta)," H. Bustaman, 62, the owner, said.

After five years, he opened a small restaurant in the area. His customers enjoyed the hot, tasty, spicy food, and Restaurant Sederhana (which literally means modest) became quite well-known. Some people then showed their interest in the business and asked Bustaman to jointly open more branches.

Bustaman, who prefers to use the term "cooperation" instead of "franchise", started to open restaurant branches in 1995 and today there are more than 20 outlets in Jakarta, Manado, Batam and other cities.

However, he complained that there were between 15 and 20 other restaurants illegally using the name Sederhana. "I am thinking of taking a legal action against them."

The illegal use of the brand name could tarnish the image of Restaurant Sederhana because the food and service at these impostors might not be up to the restaurant's standards.

Bakmi Japos, which serves noodles and Chinese food, has 23 outlets, mostly in Greater Jakarta. And requests to buy the franchise kept coming in.

"I don't know why there are so many people who want to sell noodles," said Hengky Tjoa, 46, the owner of Bakmi Japos.

Hengky worked hard before finally tasting success. He earlier sold clothes, but failed. He also could not make money selling ornamental fish. Later, he ran a video compact disc rental shop that went out of business. He did not give up and sold grilled fish on the side of the road. Again, it was a total failure.

In 1992, with capital of Rp 750,000, he started to sell noodles from a cart in front of the marketing office of the Vila Japos housing estate. And that was the beginning of his success story.

Starting a business is never easy. But once it begins to run well and is managed professionally, it could become a gold mine. That's why many people are interested in becoming a franchisee. They do not have to start from the very beginning, with the franchisor teaching them the keys of success.

Franchise operators are expected to transfer knowledge, train human resources, ensure the quality of the food and assist in developing the business.

However, there is no guarantee that the franchisee will experience the same success as the franchisor.

Erliza said that at least two outlets of Ayam Goreng Fatmawati, one in Bekasi and the other in Bandung, went out of business.

The one in Bekasi used to attract many guests, but the owner moved to Yogyakarta and asked an employee to handle everything. The restaurant was not properly managed and soon went bankrupt.

One of its outlets in Bandung suffered because the owner had a problem with the neighbors regarding parking, according to Erliza.

Unlike Sederhana and Bakmi Japos, which require capital of hundreds of millions of rupiah or even more than Rp 1 billion, Ayam Goreng Fatmawati does not require that much money. With Rp 15 million, you can have a simple kitchen and all the necessary equipment. The annual franchise fee is Rp 12 million for first three years and the franchisee should pay 5 percent of the turnover to the franchise operator.

Erliza said the turnover for a restaurant measuring about 70 square meters, like the one in Cilandak Town Square, could reach more than Rp 100 million a day. Due to the bird flu scare, sales dropped by some 30 percent last week. It is still suffering a drop-off of about 10 percent. Besides serving fried chicken, Ayam Goreng Fatmawati also offers traditional food from West Java like pepes (fish roasted in banana leaf) and sayur asam (vegetable soup).