Jakarta Business Plans

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When it comes to expanding your business overseas, franchising has become the Modus Operandi of the day. In Singapore, many businesses including restaurants, café chains and fashion chains have shown interest in and considered setting up overseas franchises. It makes sense financially for them in the sense that the franchisor (the business owner that grants the franchise) can charge an initial fee to the overseas franchisee (the person who takes the franchise). Franchising in effect provides an almost cost-free expansion since the original business receives royalties and a constant stream of income from the franchise. But there are pitfalls to avoid. Franchising may not be suitable for all businesses and an overseas operation can fail for a number of reasons.

This article sets out briefly some of the challenges a franchisor venturing overseas may face and how to overcome and resolve them.

Franchise Systems

Companies that wish to enter into a franchise agreement should familiarise themselves with the franchise system. There are three different ways to operate a franchise:

Unit franchise:

The business owner allows only one franchise outlet, and licenses all trade marks and other proprietary rights to only that one outlet.

Area franchise

The franchisee is only allowed to operate under the trade mark or brand name in one designated geographical area, such as the province of New South Wales as compared to the whole of Australia.

Master franchise

The franchisee is entitled to operate in the whole country, sometimes with a right to create sub-franchises and appoint sub-franchisees within the country.

Costing would differ for each of the above types of franchises and is also affected by the potential market size and share in the targeted country.

Regulations and Other Legal Issues

The next things to look out for when considering whether to franchise are the laws and local regulations in the targeted countries, which will impact on the franchisor. In countries such as the USA, the franchisor must comply with stringent disclosure requirements while in countries like Indonesia, the franchisor may be required to register the franchise agreement with the relevant authority before commencing operations. These requirements do not really present too much of a problem to the franchisor, but they have to be complied with nonetheless. The franchisor should also pay particular attention to laws and regulations in various other countries that directly affect the business of the franchise. One example of what we mean here is that, since February 2005, franchising has not been allowed in China for foreign retail brands which do not have a minimum of two shops and more than one year of operations in China. This amendment to the franchise regulations has made it difficult for established local brands to franchise to China.

The current President and Nobel Prize Winner, spent his some of his childhood years in Indonesia, after his Mother married Lolo Soentoro, an Indonesian citizen and moved to Jakarta- the capital of Indonesia. Lolo met her at University in the United States. He ended up becoming an Executive of an Oil Company.

There would have been few expatriates in Indonesia. Jakarta, would of resembled a poorer Indian City,- rather than a more modern city, it is today. The Obama family lived in one of Jakarta’s more exclusive areas- Menteng. Barack Obama’s mother working as a secretary for the US Embassy, around 30 minutes drive from the Menteng area.

Education in Indonesia for a child of an expatriate would have been restrictive ; International Education was first introduced for expatriates only in the 1980’s, and then opened up for Indonesians later in the mid to late 1990’s.

Choosing a school for young Barack would have been obvious, and as wealthy Indonesians traditionally believed Catholic Schools provided the best education. He attended two exclusive private Catholic Schools in the Menteng area.

His classmates fondly called him ‘Barry,” many may have been Moslems, but in a Country where it was illegal at the time not to state you have a religion. Many classmates could have been Hindu, Buddhist, Christian and Catholic- common in many schools in the USA, today.

Many of his classmates stated that “Barry” was known to tease girls, and was very studious. He even studied at night- a VOA correspondence course, in the pre-internet age. He also once broke a bamboo school fence. But he was evidently well liked at School.