Indonesia is a great long-term market for franchise businesses. The local industry started with three franchises in the 1970s and grew to some 35 franchises with 308 outlets by the early 1990s. The franchise industry began to gain widespread popularity in the early 1990s when many well-known American franchises arrived in Indonesia. By August 1997, the number of franchises reached 253 with a total of more than 2,000 outlets.
The industry faced a sharp downturn in 1997-1998 as a result of the Asian monetary crisis. The industry began to recover in late 1999 when 17 new foreign and nine domestic franchises entered the market.
Presently, there are approximately 260 foreign and 70 local franchises operating in Indonesia covering a wide range of franchise sectors. American franchises dominate the franchise industry in Indonesia and hold up to 55 percent of the domestic market for foreign franchises, which accounts for approximately 80 percent of the whole market. Until recently, estimated future growth in the franchise industry was considered to be around five percent per year.
Food and Beverages is the most popular and has the greatest potential. Other high potential sectors include Education Products and Services (including children’s education), Business Services, and Retail (specialty stores).
American franchisors dominate the Indonesian market and compete successfully with franchisors from other countries. Despite the sharp competition, Indonesia is a good potential market for foreign franchises. In the Food and Beverages and Specialty Stores, American franchises are mostly seen as potential business opportunities by Indonesian franchise seekers.