Cost of Starting a Convenience Store in Indonesia
Starting a convenience store in Indonesia can be done in either of two ways. One can either start a convenience store from the beginning or use franchising as a method to enter the industry. Whichever method is selected, several factors have to be taken into consideration such as effective planning and finance sourcing.
If you are interested in starting a convenience store or a business of any other sort in Indonesia, allow us at Paul Hype Page & Co to be of assistance. We have helped many a client incorporate a company in Indonesia. Regardless of the industry you plan to enter or the business entity you plan to select, we will work with you until your new Indonesia-based company is completely and officially established and fully operational.
For many people, franchising is a more suitable option because it does not take up much capital with regard to setup, advertising, and marketing. To effectively start a franchise, initial franchise fees must be paid. A franchisee is required to pay a one-off initial fee which is usually decided upon by the franchisor. Marketing fees will also be incurred. At some point, a franchisee will be required to actively participate in funding a marketing and advertising campaign established by the franchisor. Royalties must also be paid; depending on the franchise, royalty percentage amounts vary. The average percentage in Indonesia, however, is between 5% and 6%. Regardless of the total revenue collected, some franchisors set the revenue at a fixed periodic amount. The fee is often expressed as a percentage of the total gross revenue collected. In some cases, a franchisee may even be obligated to purchase specific products or services from the franchisor or affiliates of the franchising company. However, the franchisee must be cautious as the prices may prove to be uncompetitive in some cases and therefore lead to severe financial losses. Apart from all the franchising costs incurred, the cost of acquiring the required operational licenses must also be considered.
If one chooses to start a convenience store from nothing, several other costs are incurred. For example, the company has to register the business with the Ministry of Trade in order to acquire a business license. After the acquisition of this license, several other licenses must follow. These include a household industry license (PIRT), a Badan Pengawas Obat dan Makanan (BPOM) license, a certificate of insurance, an environmental compliance certificate, and many other relevant documents. A permit from the Ministry of Trade is also required in order to operate several other branches within the country. For one to fully decide on which option is to be selected, both options have to be weighed accordingly. Market trends such as the cost of conducting business activities have to be fully analyzed. Consumer preferences, choices, and market expectations also have to be taken into consideration.
Managing all necessary costs is an important part of a company’s financial planning. If you need any assistance in this area, we at Paul Hype Page & Co are always ready to work with you. We will help you create a financial plan which will allow your company to maximize its profits. In this way, you can be assured that your company will never face any major financial troubles.
Licenses and Regulations Related to Indonesian Convenience Stores
The Indonesian government has established regulations which provide guidelines for the operation and management of convenience stores in the country. This is a move which was aimed at safeguarding the country’s traditional markets and stores of which many were at risk of going out of business. The regulations required the ownership of several licenses to allow for effective operation of the convenience stores.
A BPOM license permits convenience store owners to produce and also allows for the distribution of food and beverage products on a large scale. It is a clear indicator that the products being sold fulfill the country’s health standards. This license is obtained from the National Drug and Food Control Agency. A household industry license (PIRT) grants permission to convenience stores to conduct small-scale business activities such as the sale of groceries.
Other than the possession of licenses, convenience stores in Indonesia have to comply with certain regulations. Convenience stores are required to set aside a particular section within their premises for stocking of beverages and other products procured from small-scale retailers and traditional entrepreneurs. This requirement is intended to promote fair competition with the declining traditional retail outlets. The Indonesian Ministry of Trade also restricted the expansion of convenience stores by limiting the total number of existing outlets to a maximum of 250. However, if a company intends to exceed the limit of 250, it must connect with a third-party entity in order to do so. This can only be made possible through the utilization of the franchise model.
This new regulation proved to be unfavorable to companies which owned convenience store outlets as they were forced to shut down operations in many outlets across the country. The Ministry of Trade then decided to review the regulation and made amendments to it. The new regulation granted permission to companies which had originally owned over 250 outlets to resume operations. However, the companies were legally required to ensure that at least 80% of their ingredients and equipment were produced locally.
Despite the challenges involved, the convenience store industry is one of the most profitable in Indonesia. The large amount of return on investment makes it easy for owners to generate much revenue. The revenue can also be channeled to other business activities such as expansion So long as profits are maximized expansion. Thus, through the high level of profits generated, the management of daily operations is fairly simple.