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Franchising still holds charm for beginners

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by November 26, 2016 General

Like thousands of other people, Makassar native Sigit Fadholika did not want to miss the once-in-a-year chance of seeking out lucrative franchising opportunities from food and beverages to health care in Indonesia’s capital.

Soon after flying in to Jakarta from his hometown, the 27-year old part-time app developer found himself trawling through the booths at the Jakarta Convention Center, where hundreds of franchisors were showcasing their businesses.

Sigit said he was eying a franchise with “a competitive edge”, which he views as a brand that is not yet widespread. One day he wants to set up his own business in Jakarta.

“I’m inspired by the restaurants and cafes I visit in Jakarta and Makassar, so I am thinking about becoming a culinary-based franchisee as a way to starting a business after I finish my studies,” said Sigit, a student from Hasanuddin University in South Sulawesi’s capital, during his stroll at the expo on Friday.

For aspiring entrepreneurs like Sigit, franchising can be the best option, as they can share in the success of a well-established business.

The business model has been booming over the past few years in Indonesia, a country that is home to more than 250 million people with a rising number of middle-class consumers and increasing purchasing power.

There were at least 698 franchise businesses nationwide operating a total of 24,400 branches as of 2014, according to the latest data from the International Franchise Association (AFI). These businesses generated overall annual revenue of some Rp 172 trillion (US$12.7 billion), with the food and beverage sector seeing most of the action.

President Joko “Jokowi” Widodo has highlighted the compatibility of this business model with the domestic market.

“Indonesia is a vast country with 516 major cities and 34 provinces. That in itself shows that the dynamics and development of the franchise business are massive. Our culture already revolves around the presence of warung [kiosks] everywhere, so I think this approach will also appeal to the public,” Jokowi said on Friday at the opening of the Indonesia Franchise and SME Expo, which hopes to draw 15,000 visitors this year.

However, the President also noted the need for local franchise businesses to expand in the region, citing as a success story popular restaurant business Es Teler 77, which runs operations in neighboring countries like Malaysia, Singapore and Australia.

Apart from Es Teler 77, other brands, namely Sundanese restaurant Bumbu Desa and retail minimarket chain Alfamart, have helped spread Indonesian franchise influence overseas.

Creating a more conducive business climate for franchise businesses required government facilitation, AFI chairman Anang Sukandar said. He added that he expected the Trade Ministry to soon finalize a road map for franchise businesses that would clearly lay out business requirement and a code of ethics recognized by the government.

While spreading one’s wings overseas is not an easy task, Indonesian franchise businesses can certainly pin their hopes on the domestic market, given that the huge potential is particularly in smaller cities and less-densely populated regions outside of Java.

“Everyone wants to be healthy, that’s why we are surviving! Our situation as Indonesia’s largest pharmacy franchise and our success is assured by the fact that people everywhere, no matter how remote, need access to medicine,” said Gideon Hartono, the president director of Apotek K-24.

K-24, reportedly the first Indonesian-born pharmaceutical franchise operating in Indonesia, now runs 360 outlets nationwide. The firm plans to add 160 stores next year.

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