Of
the two proposed regulations on franchising, one has been issued, namely the Minister
of Trade Decree no. 53 year 2012 concerning the “Implementation of Franchising”.
This regulation was recently published (last August this year). This new
regulation replaces the previous rule no. 31 year 2008.
The
essence of this trade ministerial regulation is matters in using and selling domestic
product (should be at least 80%) and financial statements of each
franchisor/master franchise that should be audited by a public accountant. And each franchise companies should put a special
logo. Which (according the Ministry of Trade) will enable to distinguish
between a franchise and non-franchise.
In
addition, independent teams will be formed, namely the Assessment and Supervisory
teams. Those teams will guide and supervise
the practices of franchises in the market place. The teams members will consist
of businesses franchise communities, Indonesian Chamber of Commerce and
Industry (KADIN) and WALI (The
Indonesian Franchising and Licensing Society).
The
second franchise regulation is not published yet, it is about modern shops,
restaurants, and café/coffee or tea shops. This regulation will set the limitation
on the increase of company owned outlets that
owned and operated by the franchisor or master franchise. It is planned that franchisor/master Franchise
are permitted to have only 150 - 200 company owned outlets. The remaining (modern
stores/restaurants/cafés) should be franchised.
However,
the amount of 150 - 200 (especially modern retail shops) still being discussed.
The Government has proposed 150 while the retail community at the most 200
owned stores.
The
policy to limit the amount growth of modern shops owned units is to avoid a dominant
position by one or two company (ies) that can potentially dictate the market as
well as inclining anti-competition. Therefore, violating the law on prohibiting
unfair competition and monopoly. I heard
that the transfer of owned outlets to franchise will be made within a certain period
of time, say 2 years or 3 years. Meaning, if a franchisor who have already 500
owned stores, then as many as 300 or 350 must be converted into franchised outlets,
who are owned by public or independent entrepreneurs / local companies within 2
– 3 years.
However,
I’ve proposed that the above regulation should not be applied retroactively.
Since, if the new regulation applies retroactively, it would potentially
disturb the performance of franchisors that have already, say 300 or more owned
stores. Why? For example, KFC a public company that offers its shares at the stock
exchange, which already operates 300 owned restaurants, suddenly is being asked
to sell 150 as many as 200 outlets to franchisees - it is definitely
complicated task. In practice is not
easy to have good and professional franchisees, in the sense to find
franchisees that have the same vision and mission as well as in line with the franchisor’s
corporate culture
In
addition, KFC – for example – which has planned to build 100 owned outlets next
year, then not permitted to build outlets, that will clearly have a negative impact
on its stock price and would harm their business. Therefore, once again, I propose that the
regulation should not be applied retroactively, so there was no need to convert
into franchises. But, when the regulation (Permendag) is issued, all franchises
must comply to the new rules, namely – I propose – to apply a ratio of 2 to 1.
For every two owned outlets establishment, one franchise outlet must be built.
I
understand that Indonesia law does not apply retroactive principle. If the government imposes this rule
retroactively, I’m afraid the business community will bring this matter to the
Supreme Court for judicial review. I
also believe, when it is applied retroactively it would certainly discourage (foreign)
franchise investment in Indonesia. This should be avoided.
However,
from the other perspective, based on the following reasons, I agree the
restriction of company owned units growth in franchising i.e.: (1) Franchising
is essentially the use of brand and a proven business system of the franchisor
to the franchise. (2) Franchising is one way to encourage the development of (local)
entrepreneurs. (3) Franchising is a method to expand the market in a
responsible way by utilizing others capital.
From
the definition above, it can be concluded that there are two independent
parties involve and cooperate with each other.
So,
basically a franchise is a partnership or business cooperation between franchisor
with franchisee (or independent businessmen/companies). Therefore, in my
opinion when only build company owned units, meaning to run franchise
not in the right way and not legal. (If seeing from the perspective of PP no.
42 year 2007 and the new upcoming Permendag)
Jakarta,
2nd October 2012
