Turnover of franchise business (franchise) in Indonesian during the first half of 2013 has exceeded 50% of the realization in 2012. Over the past year, the turnover of franchise business amounted to Rp 114 trillion. During the first half of this year, most of the franchise revenue comes from automotive, education, and travel agents. The main challenge to the national franchise business is improvement of competitiveness, physical and non-physical networking, and service facilities. In addition to increasing capacity, business climate improvement is also another challenge to the business.
Another challenge which is no less important is the lack of government support, so that the local franchise business is less developed. Local franchise is still unable to compete with foreign franchises so many foreign franchises entered the country. “In addition, the government does not provide much support to local entrepreneurs”, said Chairman of Indonesian Franchise Association (AFI), Anang Sukandar, in Jakarta (Wednesday, September 25).
Anang believes that the government still does not give much support to the local franchises so they do not compete with foreign franchises that continue to enter the country. Moreover, in terms of access to banking. Government should assist local franchises so they are able to compete with foreign franchises.
Anang said that foreign franchises usually have gone through coaching, business mentoring, and capital provision from their government. Under these conditions, their business thrives and is able to expand to other countries. For example, franchise business in Singapore. If a franchise business requires business consultation, the government financed approximately 75% of the total cost of consultation, so the business is successful.
In Anang’s note, there are about 350 foreign franchises that exist in Indonesia, while the number of local franchises is approximately 2,000 franchises. He sees that many of the local franchises are a business opportunity (BO). This is different from the full franchise concept because the business continuity of BO is not clear. “Entering BO is easy, but its business sustainability is questionable”, he said.
Anang said the franchise business will continue to advance. This is marked by an increasing number of businesses every year. This year, franchise business will definitely grow by 2% compared to last year. In facing the ASEAN Economic Community (AEC) 2015, a number of foreign franchises will be emerging in Indonesia. He said that the growth rate of foreign franchises reaches 6%-7% per year, exceeding the growth of local franchises which is only 2%.
Director General of Domestic Trade of the Ministry of Trade, Srie Agustin, said that the main obstacle that causes the national franchise business difficult to grow is inconsistent development of local franchises. Because there are many potential local businesses that can be franchised, but cannot, because the business preparation is immature. Local franchises are still looking for an ideal form of business so they are not ready to be franchised.
In addition to the internal factor of local businesses, there are also legal barriers that cause local franchise not to grow consistently. One of them is the rules on minimum time of running a business before it is franchised. Sri explained that businessmen who want to franchise their business must have been running that business at least five years before it is franchised. This makes businessmen who want to franchise their business to wait in a long time. However, the number of local businesses potential to be franchised is fairly high. There are 1,700 units of local businesses that have a potential to become a franchise.
Business News - September 27, 2013