The restaurant business is one of the most lucrative industries in Indonesia. It rivals the manufacturing and agricultural industries for this position. In 2014, it contributed to approximately 14% of Indonesia’s Gross Domestic Product (GDP). The management of restaurants in Indonesia is conducted by Indonesia’s Ministry of Culture and Tourism. This ministry outlines regulations which are used to govern the Indonesia food and drink market. Setting up a restaurant in Indonesia requires a business license along with other documents. The details of setting up a restaurant in Indonesia will be discussed in this article.
The Restaurant Business in Indonesia
As has been mentioned, the food and drink business contributes to about 14% of Indonesia’s GDP, which means that it ranks third behind manufacturing and agriculture. This shows that the business is performing well relative to other businesses. Additionally, studies estimate that the possible growth of Indonesia’s active middle-class consumers to increase from 74 million in 2014 to 135 million in 2020. This proves that there is tremendous potential within the restaurant business since most food and drink consumers in restaurants come from high and middle-class population. According to several well-known Indonesian restaurant business blogs, the local demand for restaurant services remains high due to the hectic nature of business in Indonesia’s cities such as Denpasar.
As Indonesia is one of the world’s leading tourist destinations, there is a need to build facilities such as hotels and other forms of accommodation in order to aid tourism growth. In the peak tourism seasons, Indonesia receives visitors from many nations who seek to indulge in the country’s calm climate and beautiful scenery. This increases the need for restaurant services. Indonesia is also home to a rich variety of expatriates from all over the world who work for international organizations with their bases in Indonesia. People from these communities have desires to enjoy local cuisines as part of their adaptive process to the country’s environment. This also increases the need to set up restaurants in Indonesia’s cities and towns.
The Process of Setting Up a Restaurant in Indonesia
Setting up a restaurant in Indonesia follows the same procedure as that of starting a business; however, the method of investment is different. In the restaurant business, a foreign investor may find it difficult to set up and begin operations without the support from a local partner. For local business owners, setting up a restaurant requires that they register the business as a direct investment company, which may also be known as a limited liability company. This therefore shows that the process is similar that of registering a company in Indonesia.
Incidentally, if you are interested in registering a company in Indonesia, we at Paul Hype Page & Co are able to be of assistance. Our incorporation specialists will provide you with all the information necessary in order for the incorporation process to be completed. Once we are done, you will have your own company in Indonesia which you may begin operating.
The process is more complex for prospective restaurant owners who are foreigners since they are required to not only partner with local partners but also present a work permit and valid visa to prove their legal stay in the country. A foreign investor is required to set up a Perseroan Terbatas – Penanaman Modal Asing (PT PMA), which is a foreign-owned limited liability company. Indonesia’s company law states that a foreigner can own up to 51% of total shares in a PT PMA. Alternatively, a foreign owner could appoint a local shareholder and oversee this shareholder. This would therefore allow the foreigner to have complete control of the restaurant.
Setting up a restaurant business in Indonesia as a foreigner requires complex criteria to be followed. Although the investment climate favors local citizens and local investors, it does not mean that foreign investors are lacking in the Indonesian market. However, long bureaucratic procedures may deter foreign investors for tapping into the seemingly rich Indonesian restaurant business. As the country continues to grow, evidenced by increase in GDP and stability of the rupiah, it is an inevitable fact the restaurant business in Indonesia will show similar growth. The success of the business is mostly dependent on the interaction with locals as well as legal structures put in place to regulate the business.
Licenses Needed to Set Up a Restaurant in Indonesia
Just as is the case with any other business, licenses are needed to regulate the operations of any restaurant in Indonesia. The licensing requirements differ depending on whether the restaurant owner is a local or foreigner. Nevertheless, a restaurant business must adhere to strict requirements for it to be successful. The applications for restaurant licenses are addressed to the local government’s tourism and culture departments except for the main province of Jakarta, where the licenses are addressed to the governor’s office. The following sets of licenses are needed for the restaurant business in Indonesia:
Business license – A business license represents the commercial purpose of the restaurant. It validates the restaurant’s commercial activities in Indonesia.
Restaurant license – A restaurant license is only issued when the business owner has determined the location and that such a location has been proved appropriate by the Ministry of Culture and Tourism.
Working Visa – While a visa is not the same as a license, it provides a foreigner with the right to legally operate a business in Indonesia. It can also be referred to as a work permit. It should be noted that a working visa is different from a proof of stay visa. A proof of stay visa validates one’s presence in the country while a working permit or visa validates one’s involvement in the country’s commercial activities.
Alcoholic Beverage Trading License – If the restaurant business is to indulge in the sale of any alcoholic drink, it will require this license which regulates the sale of alcoholic beverages.
Licenses from recording labels – A restaurant that wishes to play live or recorded music for its customers must obtain a license of the label owner or relevant authorities to ascertain that such music does not infringe upon the copyright laws of Indonesia.
Should you require any assistance in obtaining any license required for your restaurant or any other business in Indonesia, contact us at Paul Hype Page & Co. We will ensure that you fulfill the criteria required to receive the license, then enable to you receive the license so that your business operations may begin as soon as possible.
Legal Requirements for Setting up a Restaurant in Indonesia
The most important legal requirement in Indonesia is that of company registration. An investor must follow the legal guidelines of company registration which include the following: providing a list of directors, naming of shareholders, and defining the nature of the company’s business. This process is overseen by government authorities that receive, verify, and approve applications for company registration.
Other than company registration, investors are also required to provide a building permit that ascertains that permission to expand, modify, or build a location for the restaurant has been granted. A restaurant owner should also provide a nuisance law permit that shows that the location of the business does not disrupt public peace and safety.
The investor must also be a registered taxpayer with proof of tax compliance prior to obtaining an operating license for the restaurant business.
The investor must also provide an environmental impact analysis. This analysis shows the effects of the restaurant’s operation on the environment. It should contain a waste disposal strategy and an evaluation of the toxic nature of the waste being produced by the restaurant.
Besides the preceding requirements, the restaurant owner needs to obtain a food safety and health certification from Indonesia’s Ministry of Health showing the safety of products being sold at the restaurant. The Ministry of Health also demands a health certification for every employee of the restaurant. This should prove that the restaurant’s staffs are in a position to safely handle food and drinks without running the risks of causing in infection.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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