Cited from my book tittled

“Franchsing and Licensing in Indonesia: Regulations and Practices”

By AMIR KARAMOY

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Chapter III

WORLD FRANCHISE ASSOCIATION “MAFIA?”

The use of the word “mafia” in the above sub-heading is intended only to indicate that there is the need to revamp the world franchise association. The world association is supposed to coordinate all franchise organizations in different countries by, among others, synchronizing their activities with that of the world organization by way of guidance and promoting cooperation. Franchise organizations in every country (both members and non-members of the world association) should be able to retain their autonomy with regards to their efforts in developing their respective franchise industry. Autonomy here refers to the local organizations’ distinction based on their respective local wisdom. It should not assume the posture of the world football organization FIFA (Fédération Internationale de Football Association), which wishes to manage “the pulse” of all football organizations in the world while at the same time is embroiled in bribery and corruption cases.

The author believes that the world franchise association should possess sufficient data and knowledge on franchise organizations in all countries across the world. It is not sufficient if data and knowledge are obtained only from local franchise associations that are members of the organization. A world franchise association must have their own independent "intelligence agent" in order to update data and information on the franchise industry and work performances of franchise associations in the world.

The author is of the opinion that the admission requirement for a country’s membership in a franchise association should not entirely be determined by the ability of the local organization in paying membership fees alone, but primarily be based on their track record. In this regard, an "Intelligence agent" can provide data and information on the performance of a franchise association in a country. Thus, the most important requirement of member admission in a world franchise association is the member’s good track record.

For example, it is questionable if a franchise association in a certain country is managed by a Chairperson who has been holding the same position for over 25 consecutive years (Anang Sukandar, the Chairman of Indonesian Franchsie Association - AFI case). 

What does their Articles of Association say about the selection of their Chairperson? Is it pursuant to the organization’s mechanism set out in their by laws? Whether a local association operates in a province or city or on a national basis should also be re-confirmed. Such matters need to be investigated by the world franchise organization in order to ascertain the reputation of local associations that wish to be its members. This also applies to those who are already members.

One of the many negative labels that have been attached to the world franchise association is that its presence is merely to promote the economic interests of developed or western countries. A case in point is franchise exhibitions held by the world franchise association; it seems that they are intended to promote franchises from developed countries in South (or developing) countries, particularly fast-growing economies such as China, India and member countries of the ASEAN (Association of Southeast Asian Nations). These countries are mostly in Asia, Africa and Latin America and are only used as target markets by international frachise associations.

Even if there are efforts to advance franchises of rapidly developing countries, they are often subject to rules set by the world franchise association. In many cases, these rules are exclusive, such as recognizing only franchise associations that are members of their organizations. Local associations that are not members on the international level tend to be hampered by the world franchise association’s refusal to recognize the “legality” of their activities.

In many cases, a local association that is not (or is yet to be) a member is in fact recognized by the local government because of their qualification and professionalism in implementing work programs designed to advance the local franchise industry. On the other hand, official members of world franchise associations mentioned above work merely for profit and the personal gains of Chairpersons or board members.

World franchise associations usually collaborate with their embassies abroad. For example, when a franchise exhibition is held in New York, the party busy marketing the event is the U.S. Commercial Attache assigned to different countries. The question is, why does a franchise association’s (a member of the private sector) activity appears to be the business of a country’s government?

International franchise associations tend to think that they know much about franchising in a given country although in fact their knowledge is actually poor. This is because their only source of information is the local association that happens to be its member. For instance, franchise data in Indonesia, as far as the author knows, is often manipulated. For this reason, the author has proposed a number of times to the government, especially the Ministry of Trade of the Republic of Indonesia, to conduct primary data collection in order to obtain accurate data regarding the growth of franchising in Indonesia.

World franchise associations often compete amongst themselves and each run their programs exclusively. For instance, if a world franchise association X holds an event, then members of association Y are not allowed to participate in the event unless they are co-sponsors or advertise their products.

In my position as Chairperson of the National Committee on Franchising, Licensing & Partnership, Indonesian Chamber of Commerce and Industry (KADIN INDONESIA), I once "reprimanded" a visiting delegation of a world franchise association regarding such matters. However, they brushed me aside and did not pay any attention whatsoever to it.

In view of the predominant role–and the exclusive nature—world franchise associations play, along with their tendency and inclination to promote the interests of developed (western) countries, the author decided to introduce the shariah-based franchise idea with Indonesia and Malaysia as the starting points. Shariah refers to the idea of applying and putting into practice one of God's commandments, which is "Rahmatanlil'alamin" (blessings for the whole universe and its inhabitants).

What the author means by the practice of shariah is not about propagating religious teachings at all, much less the intention of belittling other religions. Shariah here is a value system that is universal, a behavior guidance related to honesty and fairness, a fair profit-sharing and proportional profit distribution system, including to the needy, in addition to instilling the values ​​of cleanliness (both in the narrow and wide sense of the term), protecting the environment, building cooperation on the basis of equality (non-discriminatory, including gender issues) and is inclusive in nature.

Why are such issues pertinent in the franchise business?  Because franchise is, in essence, about sharing. In other words, it is about sharing the values ​​of goodness and equality in business, sharing of knowledge, skills, know-how, experience, profits and much more.

Again, shariah here is the establishment of business conducts based on values ​​stated above.