Attracted by the promising prospects of Indonesia's domestic consumption (with per capita GDP rising strongly), a total of about 100 foreign franchises will enter the Indonesian market in 2013. The most popular investment destination of these franchises is Indonesia's culinary sector. The majority of franchises originate from the United States. Others include those from South Korea, Japan, Australia and Europe. In 2013 so far, more than 170 foreign franchises received approval from the government.
Approximately 60 percent of these approvals constitute new players, while the remainder are franchise holders or franchisees that have to renew their permits. The permit, Franchise Registration Certificate (Surat Tanda Pendaftaran Waralaba), is valid for five years.
In February 2013, the Indonesian government set new rules aimed at limiting the amount of outlets that a franchise holder can own in Indonesia (to 250 in total). The government implemented this rule to protect the country's small and medium enterprises. This policy change has far-reaching consequences for large fast-food companies such as Pizza Hut, KFC and Dunkin’ Brands Group Inc. The franchise holders or franchisees will have five years to adjust their businesses to the new policy. The new rules are formulated in Ministry of Trade Regulation No. 7 2013 on Partnership Development in Franchise Business Services for Food and Beverages (Permendag Nomor 7).
As domestic consumption accounts for about 55 percent of Indonesia's economic growth, it is a good market for the franchise industry. However, next year there may be a slowdown in the influx of foreign franchises due to political uncertainties (legislative and presidential elections will be held in mid-2014), higher minimum wage demands, and the weakening rupiah.