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.