Indonesian food and beverage firms question new regulations

By The Jakarta Post | Source: ANN
Several large food and beverages franchisers in Indonesia are saying that new regulations to diversify outlet ownership would hinder their expansion in a booming local market.

Justinus Juwono, the director of PT Fast Food Indonesia, the master franchise holder of US-brand KFC, said at a seminar on Tuesday that he questioned the potential effects of the regulation.

“We haven’t received the guidelines yet, but it seems to me that the regulation will disturb our business. We currently have 440 outlets nationwide and plan to add 25 to 30 more,” Juwono said.

The regulation, Trade Minister Decree No. 7/2013, limits national brand franchisors and master franchise holders for global brands to 250 outlets, requiring then to offer equity participation to a third party to open more outlets.

Under the equity participation scheme, third parties would be able to own 40 per cent of outlets requiring less than a 10 billion rupiah(US$1.03 million) investment or 30 per cent of those requiring an investment of more than Rp 10 billion.

Justinus said that US-based KFC, present in Indonesia for 35 years, also expressed concern about the regulation, as did Anton Wijaya, the vice president of PT Top Food Indonesia, owner of the Es Teler 77 brand.

Es Teler 77 currently had 196 outlets across Indonesia and the company planned to authorise 30 additional franchises this year, each requiring between 1 billion and 1.5 billion rupiah, Anton said.

He said that he did not object to the 250-outlet cap on company-owned outlets, as 70 per cent of Es Teler 77’s existing outlets were franchises.

However, Anton questioned the effect the rule would have on small investors. “Only the rich can afford to take 40 per cent ownership of outlets. How could you say it is made to support SMEs? ” he added, referring to small and medium enterprises.

Trade Minister Gita Wirjawan said at keynote speech at the event, which was hosted by the ministry and The Jakarta Post, that the regulation was aimed creating opportunities for both big and small investors in the food and beverage industry.

“Indonesia’s economic pie will be around US$60 trillion in 20 to 30 years, of which 50 to 70 per cent will be related to consumer-goods consumption, including food and beverages. We want to provide opportunity for big guys and smaller players, such as SMEs,” Gita said.

Franky Sibarani, the Indonesian Employers Association’s deputy-secretary-general, came out in support of the regulation, which he said would “protect the local market and encourage

partnerships, taking advantage of our middle class, which will grow from 40 million this year to 135 million in 2030”.

Meanwhile, the chairman of the board of directors of the Indonesian Committee for Franchisees and Licenses (WALI), Amir Karamoy, supported the threshold, saying that the ownership threshold should be set at 51 per cent to give more opportunities to SMEs.

*US$1=9,746.59 rupiah