There are many examples of franchise businesses in Indonesia, including well-known ones like Alfamart and Indomaret, as well as culinary businesses like Mixue.
One of the reasons franchising has become a popular business model is because it offers aspiring entrepreneurs the opportunity to explore the business world with a proven concept and an established brand.
However, this doesn’t mean that franchise businesses are without risk. Here are some things you should know about this business model.
What is a Franchise?
Franchise is a business model that is run when a person or company as a business owner (called a franchisor), allows another person or company (called a franchisee) to run a business using their brand and methods.
The business owner will provide support and guidance to the franchisee, who will pay a fee or a percentage of their earnings in return.
This type of business model has been found in many industries, from fast food, retail, and even hotels.
Many examples of franchise businesses have become popular because they can provide a better chance of success than starting a business from scratch.
Why? Because a franchise business already has a well-known brand, loyal customers, and a proven system for running the business, it can reduce the risks that can occur when starting a new business.
Moreover, franchisees usually receive assistance from the owner, such as finding a location, advertising, and training. This makes franchising a great way to start your own business while still receiving support and guidance.
Cost System in Franchise Business
The two most common costs in this business model are franchise fees and royalty fees. Here’s an explanation and the differences.
1. Franchise Fee
Essentially, a franchise fee is a payment made to the franchisor for their great idea. This fee is a one-time payment upfront and consists of:
- License fee to use the franchise brand for a certain period of time.
- Fee for the privilege of using the franchisor’s Standard Operating Procedure (SOP) for a certain period of time.
- Design of franchise location or outlet.
- Initial stock of raw materials needed for the business to start running.
- Business plan strategy.
- Training costs, including supervision and implementation.
2. Royalty Fee
This is a licensing payment from the franchisee to the franchisor. By paying a royalty fee, the franchisee is permitted to use the parent company’s trademarks, logos, brand names, and other forms of intellectual property.
Royalty fees are a recurring expense. In most franchises, the royalty fee typically ranges from 5% to 12% of the franchisee’s gross sales.
In some cases, franchisors may also set a minimum amount that must be paid, regardless of whether your franchise business generates revenue or not.
Franchise Types
Franchising is a diverse business model that spans a wide range of industries and sectors. Here are five common types of franchises:
1. Product Distribution Franchise
This type involves the franchise owner granting the franchisee the right to distribute or sell their products within a certain territory.
This franchise is commonly found in the beverage, consumer goods, automotive parts, and household appliances businesses.
The benefit is that the recipient benefits from the owner’s established brand and supply chain, while the owner expands its market reach through the recipient’s distribution network.
2. Business Format Franchise
In this type, the franchisor provides the franchisee with a product or service with a complete business system, including guidelines on marketing, training, technology, and ongoing support.
This way, the recipient can emulate the owner’s success by implementing a proven business model, a recognized brand, and ongoing support.
3. Conversion Franchise
This type involves an existing business, which is converted into a franchise model by adopting the business owner’s systems and branding.
Conversion franchises allow independent businesses to benefit from the brand, marketing, and operational support of an established owner, while still maintaining their local identity.
This type of franchise is commonly found in hotels, restaurants, and fitness centers.
4. Master Franchise
This franchise involves the franchise owner granting the main franchisee the right to develop sub-franchise businesses in a certain area or region.
In this franchise, the main franchisee is responsible for finding, teaching, and assisting sub-franchisees in the assigned territory.
This type is often seen in real estate, education, and cleaning services businesses.
5. Co-Branding Franchise
Tipe ini menyatukan dua atau lebih merek yang sudah terkenal untuk beroperasi di bawah satu unit franchise.
This allows franchisees to offer complementary products or services in one location, while still attracting a wider customer base and increasing revenue potential.
Examples of this type of franchise are convenience stores partnered with fast food restaurants or automotive service centers combined with retail outlets.
Advantages and Disadvantages of Franchise Business
Seperti bisnis lainnya, franchise atau waralaba juga memiliki keuntungan dan kerugian. Berikut penjelasannya.
1. Benefits
- A well-known brand. This can allow franchisees to start a business more quickly and penetrate the market more easily than starting a new business.
- Proven business model. Franchise owners have generally refined their business methods, reducing the need for trial and error and increasing the likelihood of success.
- Ongoing support. This support is crucial for franchisees navigating challenges and remaining competitive in the marketplace.
- Purchasing power. Franchisees can negotiate better deals with suppliers, reducing costs and increasing profit margins.
- Shared success and network collaboration. This collaborative environment can provide valuable insights and support for business growth.
2. Losses
- Investment and initial costs. Additionally, franchisees will likely be required to pay royalties or ongoing marketing fees to the franchisor.
- Lack of control and flexibility. The recipient must comply with the systems and guidelines established by the owner thereby limiting the ability to make independent business decisions.
- Profit sharing. The recipient must share a portion of the profits with the owner through royalties or other fees, which can reduce the overall profitability of the business.
- Dependence. If the owner faces financial or operational difficulties, this can directly impact the business operations and profitability of the recipient.
- Brand reputation. If the owner faces a negative reputation, the franchisee’s business and customer perception will also be affected.
Examples of Franchises in Indonesia
The following are some examples of franchises that are already well-known in Indonesia.
1. Retail Franchise
- Indomaret
- Alfamart
- Alfamidi
- Superindo
- Lotte
2. Examples of Food Franchises
- Sabana
- Hisana
- Mie Gacoan
- Geprek Bensu
- Rumah Makan Padang Sederhana
- Kebab Baba Rafi
- Kue Balok Parikesit
3. Franchise Minuman
- Janji jiwa
- Kopi Kenangan
- Fore coffee
- Kopi Lain Hati
- Boba Time
- Tea break
- Haus!
- Chatime
- Xi Bo Ba
- Teh Poci
- Es Teh Indonesia
- Mixue
4. Logistics Franchise
- J&T Express
- SiCepat
- JNE Express
- Ninja Express
- TIKI
- JET Express
If you’re interested in purchasing one of the franchise business examples above, don’t forget to still have your own business management application, such as Labamu.
There are already more than 84,000 entrepreneurs in Indonesia whose businesses have experienced growth and become easier to run after using this application.
Ada berbagai fitur yang ada di aplikasi ini, mulai dari QR Menu, Pos Kasir, Produk, Penawaran, Pelanggan, hingga Laporan dan Buku Utang.
Come on, download the Labamu app on Google Play or the App Store now and join other entrepreneurs to help grow your business!
