Global Business Guide Indonesia

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Joint Ventures | Franchise
Boga Group | Mr Kusnadi Rahardja
Mr Kusnadi Rahardja

If you are entering Indonesia in a line of business closely associated with lifestyle trends and tastes, it is important to do so with a good local partner well versed in the market’s latest conditions.

Mr Kusnadi Rahardja, President Director

Established in 2002, Boga Group is a leading player in Indonesia’s food service industry with a growing presence in major cities across the archipelago. What can you tell us about your company’s background and its strategies going forward?

Boga Group’s portfolio presently includes 12 brands; the majority of which are franchises. We also manage our own home grown brands and strive to introduce new concepts into Indonesia’s food service industry, such as sushi kiosks popular in Japan that specialise in take-away. Among the most recent additions to our array of in house brands are Ten Ten, the first tempura house in Jakarta, as well as Master Wok. All Boga Group brands adhere to the highest level of quality and consistency; a fact demonstrated by our company’s success in becoming the first restaurant service provider to obtain HACCP certification for our Pepper Lunch, Bakerzin and Sushi Tei outlets.

We differentiate ourselves in the industry as a company that is able to form strong ties to its principals. This allows for further cooperation with existing partners in starting new ventures, such as our collaboration with Sushi Tei to introduce our sushi kiosk concept, in addition to expanding the presence of their brand in the Indonesian market. Our approach to working with international franchises is thus very much a long term one focused on developing concrete partnerships as opposed to simply obtaining the rights to a franchise without working with partners beyond this initial agreement.

In addition to this, our group has sought to diversify by entering the retail industry for children’s fashion through the high end brand Poney and Poney Enfants.

Given the context of intense competition in the local food service industry, what are the key factors for success as a company engaged in restaurants and franchises?

The success of our company in Indonesia’s food service industry can be attributed to our willingness to look for new concepts around the world that can be adapted to the local market. We use our knowledge of international trends to become pioneers in Indonesia. For example, when we first introduced Bakerzin, there was no other dessert cafes in the country. Cafes at that time were primarily centred on coffee, such as Starbucks, Excelso and Coffee Bean. Bakerzin, while offering premium quality coffee, changed this by focusing on cakes and pastries. Our role as a pioneer also extends to adding culinary variety. Upon launching the Paradise Dynasty brand in Indonesia we decided to make available a multitude of pork dishes and have since enjoyed considerable growth, with four outlets opening over the last two years.

It is also important to keep in mind the challenge of tailoring existing products to Indonesian consumers, particularly those living outside of Jakarta. Addressing this challenge involves balancing between staying true to the menu as it is offered abroad and creating new dishes, such as spicy sushi rolls that appeal to local tastes. Foreign franchises entering Indonesia must therefore be sure to identify franchisees able to tap into an understanding of local preferences and come up with products befitting the standards of an internationally recognised brand.

Indonesia recently enacted a limit on the number of franchises that can be owned by a single entity as well as put in place stricter requirements for the use of local content. How have these changes in regulation impacted your outlook for the future?

It is our view that while the new regulations appear very strict, there are provisions in place to ensure that major complications can be avoided, especially in regards to the use of local content.

Companies able to prove via an independent audit that they need materials not available in Indonesia will continue to receive permission to import. As such, I do not think that the change in laws concerning franchises will prevent the entry of new brands. In fact, we have already seen some adjustment on the part of international manufacturers now coming to Indonesia to produce here and meet rising demand for ingredients from international restaurant franchises.

Boga Group has in recent years expanded in number of outlets across Indonesia as well as in the number of brands in its portfolio. Between these two approaches, which will be the primary driver of growth in the future?

It is our goal to achieve growth both in terms of depth and width. By the end of 2014, we plan to be in 11 cities – adding Pekanbaru and Balikpapan to our existing outlet locations. The demand for internationally attuned lifestyles is not by any means limited to Jakarta, and we intend to tap into this potential.

For opening up new stores outside of Jakarta, we usually seek a suitable business partner to form a joint venture company through which we develop our brands together and serve a particular region. We are thus willing to engage with strategic investors who wish to become franchisees for our brands in parts of Indonesia that they are very familiar with. Through this approach as well as opening outlets 100% owned by our group, we expect to have a total of 120 outlets by the end of 2014. From a new franchise point of view, we are open to bringing in new brands insofar as they offer something novel to the market.

We also intend to move into regional markets in the ASEAN, though this will likely take place over a longer period of time given the scope for local opportunities.

How is your company positioned towards cooperation with foreign partners and investors in addition to working with international franchises?

Our preferred type of collaboration with foreign entities is through franchising as this often entails a more straightforward process than joint ventures. When looking for potential franchise principals, we are most interested in working with companies that can offer knowhow in terms of recipes and SOPs native to their market but uncommon in Indonesia.

To these potential partners we offer a keen understanding of Indonesian consumers and the best way to cater international brands to the local market.

As a final message, what would you like our readers at GBG Indonesia to remember about Boga Group and Indonesia?

If you are entering Indonesia in a line of business closely associated with lifestyle trends and tastes, it is important to do so with a good local partner well versed in the market’s latest conditions. This partner’s expertise must span the breadth of Indonesia, as consumer preferences can vary greatly from one city to another given the diversity of the Indonesian palate.

Global Business Guide Indonesia - 2014

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