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How Businesses Can Survive an Unexpected Economic Shock (SARS & COVID-19) and Thrive to Emerge Stronger

According to studies by Mckinsey and Bain & Company, the key for businesses to survive an economic shock whether from a pandemic like the SARS Virus or now COVID-19, or a good old fashioned economic down turn is to take action act as fast as possible.

In the historical economic recessions of 1980, 1990, and 2000, 17% of the companies they studied went bankrupt, private, or were acquired.  Just as significantly there were over 10% of companies that thrived to perform event better than before the crisis.

To successfully navigate this current economic shock caused by COVID-19 and come out even stronger when the upturn happens, companies need to be flexible and ready to adjust.

Here are some lessons gleaned from past experiences to help us weather this difficult period.

  • Be willing to change quickly

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Companies who respond swiftly and take action to reduce costs as well as focus on managing resources better will typically emerge from the crisis stronger than those respond at a later point.

Reducing costs does not mean businesses should be cutting headcount and reducing quality but rather,  look at ways to shift resource distribution and improve the internal processes.

With the effects of COVID-19 being far more wide spread than SARS, experts have indicated the consumer spending could take some time to return.

Regardless of when the recovery upturn happens, businesses should be responding to this crisis in ways that ready them to rebound quickly.

  • Financial discipline and fundraising

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Rule number 1 for businesses during an economic crisis is to not run out of money. This means a combination of a reduction in expenses and having access to funds, whether through debt financing or fundraising.

Encouraging businesses to reduce expenses does not mean that businesses should aggressively cut costs as this could cause them to downsize themselves out of existence.

This simply means that businesses should take early action to reduce spending on non-essential investments, negotiate better fixed expense deals and reduce labor costs through encouraging no-pay leave, reduction in hours.

Whilst reducing expenses can help with survival, the access to additional funding can help the business consolidate its business to emerge stronger.

One of the key elements of weathering a business downturn to come out stronger is having access to working capital.

Stronger and more forward looking companies can view this as an opportunity to acquire more market share and customers as weaker competitors fold.

Besides awaiting government reliefs, companies can start to fund raise to buffer their coffers to come out of this stronger.

  • Improving resource management

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During an economic crisis, weakness in the business model emerge very quickly. Over reliance on any specific supply chain, talent and locations can weaken the business in critical areas.

Re-evaluating how the business processes are managed can greatly improve productivity and over-reliance on any one resource. This also becomes an important business continuity contingency to ensure business can keep running in the case of unexpected crisis.

Ensuring the right team members are motivated can prove instrumental in building resilience in an organisation.

With this in mind, during an economic crisis, companies can focus on developing depth to their training programs and cultivate a motivated workforce. This improved training framework can prove a great asset to help position the business for a quick rebound.

  • Investing in the future

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In order to truly thrive, businesses must set their sights for the long term and make decisions that can place them in a position to grow.

Weaknesses in business management processes often surface in times of crisis and  require a rework of these business processes documentation.

One of the key areas that businesses should invest time and effort in is to document these improved business processes.

Today, Standard Operations Protocol Documentation Tools are accessible online and Businesses can easily upload, design and update their business processes in real time.

During a crisis, companies should resist knee jerk responses and take decisions that ultimately eat into future profits.

Instead, they should look towards different expansion strategies like developing a franchise system, expand their geographical reach, acquire other companies for a much lower price than usual, or find innovative product offerings that could address new demands in the changing market.

  • Using business process transformation

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Investing in technology driven business process transformation can also build resilience in a company. Technology can help businesses further automate processes, improve quality and lower operating costs.

During a downturn, the opportunity costs of redirecting the attention of key staff to improving business processes leveraging the right technology can boost efficiency and give the business a competitive edge.

The opportunity cost of investing in technology is lower for many companies than it would in good times.

Firms invest in IT during recessions because their opportunity cost is lower. When businesses are engaged with aggressively maximizing revenue and production, resources that can be diverted to such projects are scarce.

Implementing these digital technology transformation projects can also  help cut costs in the long run. Companies should prioritize “self-funding” business transformation projects that pay off quickly.

When a business leverages technology, business analytics and agile business practices to manage its business, they tend to be able to understand the threats they face and respond more quickly.  and hence better able to handle uncertainty and rapid change

During times of expected economic downturn, businesses should keep their eyes focused on the future and be ready for the upturn by using this period to review their existing business models, strengthen internal training and processes.

Is DIY Franchise Development a recommended way to Grow?

Many experts debate upon whether it is possible for Business owners to develop their own Franchise system independently. On one hand, experts do have deep franchise sector experience that can help Brand Owners avoid many common pitfalls when developing a franchise system but on the other hand,  Brand owners may not be in a position to invest large amounts upfront to develop a franchise system. Some brand owners also feel that consultants may also offer cookie cutter experiences and do not know their businesses enough to develop a robust franchise system. A middle road where brand owners can leverage their own experience with industry expert templates could very well be the answer for this breed of ultra-independent, self-reliant, forward thinking brand owners.

DIY Franchise Development Solutions provide potential brand owners who wish to develop their own franchise programs an alternative to hiring a franchise consultant to build the franchise system. These DIY Franchise Solutions serve as a guide for potential Franchisors to use as a starting point for the development of their own franchise system.

Limitations of a DIY SOP Solution

DIY Options often mean that the potential franchisor is provided with franchise document templates and then left to fill in the blanks of static non intuitive documents. This can be an unhelpful and  frustrating process. DIY needs to be more than a set of templates. It needs to be more intuitive and interactive so as to offer the brand owner a more informed and value added experience.

Step by Step Franchise Guide

Astreem’s GO-DIY Franchise Solution, Franchisors are onboarded in a step by step manner. Each project starts with the franchisor being taken through a guide of what franchising is. Following that, the franchisor starts to gather the data required to generate the financial plan that is the basis of the franchise strategy. Once all the data is input, GO-DIY Franchise strategy will generate the proposed franchise Fee calculation guidelines, franchise Profit and loss spreadsheets. Depending on the data input, the franchisor will get a good idea of:

  1. How to price their Franchise model
  2. What are the costs involved
  3. If the proposed franchise model is viable

We know that various industries have different business models and that DIY Franchising is not  one size does not fits all. Every business and individual sector, from F&B, education, retail to real estate, is different and therefore, a tailored approach is needed. Although we do not cover every industry and sector, we do develop industry specific templates to mirror actual industry use cases.

WHY GO DIY franchise development

Although DIY Franchise is not for every Brand owner, it can be suitable for Franchisors who are comfortable being in the driver’s seat, willing to invest time and effort to document their business operations in greater depth and is relatively technology savvy enough to leverage technology to implement the Franchise management system.

  1. Get access to Industry specific Franchise Strategy Development and SOP documentation
  2. Input Brand specific data to customise the output
  3. Analyse your own franchise valuation
  4. Produce your own franchise agreement highlights
  5. Have access to maker checker programs with Franchise Industry specific experts
  6. Have access to industry specific Audit templates
  7. Have access to industry specific Franchise Onboarding Porgrams
  8. Customise to make the program as detailed or as simple as you wish
  9. Low cost
  10. Have Control over the speed of development
  11. Technology allows Brand owners to implement the Franchise system immediately to the franchise network
  12. Be independent in the franchise development process but not alone

What GO-DIY Franchise Offers

When developing your franchise offering – to avoid costly problems with your franchisees you need to address every aspect of the offer:

This includes:

  1. The franchise financials
  2. The Franchise support
  3. Brand Culture and values
  4. Training
  5. Set Up and related costs
  6. Roles and responsibilities
  7. Performance guidelines
  8. Supply chain
  9. Agreement Highlights
  10. Territorial definitions
  11. Commercial terms
  12. SOP Documentation
  13. SOP management
  14. Audit development
  15. Audit management
  16. Training Framework
  17. Training Performance Management
  18. Franchisee Onboarding Process
  19. New store Opening Processes

 

How to embark on GO DIY Franchise

Brand owners who wish to explore the DIY Franchise route can find out if a ready Franchise structure template already exists for their industry. If there is, the next step is to decide if they wish to develop a Single Unit franchise, Area Franchise or Master Franchise. They should also decide if an SOP is needed and if they wish to also enlist the help of online Franchise experts to mentor them in their Go-DIY Franchise journey. Once decided, they can go ahead and subscribe for the service.

 

GO DIY Franchise NOW!

Taking your Franchise to Indonesia

Indonesia is one of the countries that franchise owners often enquire about when thinking about brand expansion. The close proximity of Jakarta to Singapore and the number of Indonesians that come through Singapore gives Singapore brands a happy unfair advantage in Indonesia. Singapore brands are well received and offer a great balance of International appeal and local familiarity to the Indonesian market. Brands like Fish & Co, Imperial Treasure, Shilin, Seoul Yummy, Eton house, Seriously Addictive Maths, and most recently the much loved Joe & Dough have enjoyed success in Indonesia. We thought it might be useful to share some Indonesia centric information for business owners considering Indonesia as a possible destination for their brand growth.
To begin, entering Indonesia by appointing Master Franchises is a good way to enter this very promising new market. It allows the franchisor to focus on readying the brand for international market whilst leveraging local knowledge for real estate, human resource and navigating local legal requirements. This reduces the risk for both Franchisor and franchisee whilst each focus on what they do best. When implemented well, the brand can increase tremendous growth due to the large market potential of Indonesia. Given that the bottom line can be very attractive when a brand is well executed, Some franchisors owners also use the franchise model to enter into Joint Venture agreements to co build the brands in the country. This format increases the upfront risks, but when well executed, both parties can enjoy the rewards of a profitable partnership.

In this article we will cover the following:
1. Franchise Landscape of Indonesia
2. Considerations when entering the Indonesia Market
3. Legal Framework for Franchising
4. The Franchise Registration Certificate
5. Criteria that triggers Franchise Registration requirements
6. What is the Best Market Entry Strategy into Indonesia?

Franchise Landscape of Indonesia
Indonesia has a relatively young population of 288 million represents both a sizeable workforce and pool of consumers. This is complemented by the country’s steady economic growth of 5.1% in 2017, and 5.1-5.5% expected for 2019. 58% of the population is now living in Jakarta making it the most populated region.
The Franchise (Both local and international Brands) sector has been buoyed by the increased spending power of its growing middle class. In the more populous cities, major International and very creative local franchise brands have been growing exponentially. Brand owners should not disregard the creativity of local Indonesian brands like Jco, Upnormal Coffee Roasters, Kitchenette, Union Tanamera, Pizza&Birra, Social House, DJournal certainly offer lifestyle concepts that can rival international brands. In order to compete with the local brands, franchisors need to be aware that in Indonesia, although the market is still developing, and likely to be exponentially bigger than home country, they need to put in conscious effort to localise their brands, be conscious of the lifestyle factor and be well priced to reflect the value.
According to Ministry of Trade, there are 1,000 legal franchise in Indonesia; 540 of it are Indonesian companies and 460 foreign franchise companies. The franchise industry led by Food and Beverages companies for 62.4% and Education companies for 18.1%. The rest of it is contain of retail (14.9%) and service (4.6%). Allegedly there are 1,400 other non-franchise businesses that cover Indonesia franchise sector. In 2016, International Trade Administration projects that there will be 8% increase in local franchise, and 14% in foreign franchise each year F&B Industry in franchising is the biggest compares to the other sectors, in 2017 it has 624 franchise brands which 317 of it International brands and 307 domestic brands.
Not surprisingly, of the International franchise brands in Indonesia, almost 40% of the brands are from the US followed by a strong presence of Made in Singapore Brands. F&B remains the MOST sought after franchise category.
This finding is in line with Ministry of Industry report indicating the continued growth of F&B industry at an estimated 9% in 2019. As a whole, the F&B sector now contributes up to 34.33% of the countries non Oil& Gas GDP. The Indonesian government encourages the growth of this sector as most of the owners of F&B businesses are Micro and small Businesses, a driving force behind the increase of earning power equality.
International brands that have performed well in Indonesia are KFC, Mc Donalds, Wingstop, Bread Talk, Canele, Killiney, Lawson, Mothercare, Snap fitness, Charles & Keith, On the whole, rentals and manpower work very favorably for brands that come from countries with very high real estate prices and man power scarcity. As a result, franchises thrive in these markets because the net profit margins are very comfortable, even after paying the franchise royalties.

Considerations when entering the Indonesia Market
In order to capture the market, brands entering Indonesia need to recognize that a fair amount of localization is required in order for the franchisee to enjoy a successful market entry. If a brand insists on franchisees implementing the brand exactly as its home country, it exposes the brand to a high amount of uncertainty as to brand acceptability. Brands like Joe & Dough entered Indonesia successfully invested a fair amount of time and research to understand local consumer habits, lifestyle, competitor offerings to develop a final market specific strategy.
Legal Framework for Franchising
In order to protect the Indonesian franchisees from Unscrupulous and Fraudulent Franchisors, Indonesia has a franchise regulatory regime aimed at controlling the activities of franchises. Franchisors are required to register for a franchise Registration Certificate also known locally as the Surat Tanda Pendaftaran Waralaba-STPW.
The Franchise Registration Certificate
The franchisor and the franchisee each must file for, and obtain, an STPW. Each STPW is valid for five years and may be renewed each time for five years. In addition, an annual report must be filed with the Ministry of Trade.
The franchisor must apply for, and obtain, its STPW before the franchise agreement may be signed. The following are required for the STPW submission by the franchisor:
• The disclosure document in the Indonesian language (and a legalized disclosure document if prepared in another language) the minimum content of which is explained above
• A copy of the passport of the franchisor’s representative
• Legal documents of the franchised business, i.e., technical business permits or the license issued in the franchisor’s home country
• Statement Letter/Reference Letter issued by the Trade Attaché of Indonesian Consulate in the franchisor’s home country
• The franchisor’s Indonesian trademark registration certificates
• The local content statement
• A list of manpower to be employed for the operation of a typical outlet
A copy of the draft franchise agreement in the Indonesian language (translated by a sworn Indonesian translator)

For foreign franchisors, there are pre-contract disclosure requirements that need to be legalized. The documents are:
• The franchisor proof of identity and the legal documents of the franchise business
• Franchisor’s business history
• Franchisor’s organizational structure
• Audited balance sheets for the last two years (for medium and macro businesses)
• The number of franchise business
• A list of franchisees
• The rights and obligations of the franchisor and franchisee

The franchisee must apply for its STPW following execution of the franchise agreement and must also file an annual report. Its STPW submission must include:
• The franchisor’s Disclosure Document in the Indonesian language
• Copies of the signed agreements in the Indonesian language
• The local content statement
• A list of manpower to be employed at the typical outlet
• The franchisor’s Indonesian trademark registration certificates
• The franchisor’s STPW
• The franchisee’s Deed of Incorporation/Articles of Association with its approval from the competent government authority

Criteria that triggers Franchise Registration requirements
Business are required to be registered as a franchise if it triggers the following criteria:
• Having specific business characteristic or Unique selling proposition;
• Franchisor must have approximately three to five years’ experience in business.
• Have written SOP and a description of the proposed goods and service provided
• Minimum 10-year term for a master franchise
• A Replicable system (easily applied and taught)
• Giving continuous support
• Registered or Have Applied their Intellectual Property Rights (IPR) to Directorate General.
• Ongoing Support.
• Have a system that is easy to learn and apply

What is the Best Market Entry Strategy into Indonesia?

Depending on the area of business your franchise exists in, you need to make sure you enter the market with the right mindset. There is no magic formula for success but we have found that companies that followed a broad foundational market entry strategy usually find more success than others. Some of the areas these successful franchisors invested time in are:
1. Conduct Due Diligence on the market, including research on the existing competitive landscape, pricing of the competition’s product of service, Cost of products or service and identify targeted audience
2. Spend time to find a like-minded franchisee or JV partner who will willingly handle the local operations and allow you to build on the brand.
3. Get the brand positioning and brand communication right. Here franchisors should ensure the franchisee invests in both effective off-line and Digital marketing so that the Go-To Market Strategy is well executed.
4. Invest in technology to ensure that you as a franchisor gets access to real time information.
5. Ensure training and on-going audits are conducted to ensure sustainability.
About Astreem Consulting
Astreem Consulting was founded in 2005 for the purpose of building Franchises across Asia. Over the last 14 years, Astreem has been steadily building the Franchise brands across the region from Singapore, Malaysia, Indonesia, Thailand, Philippines and Australia.
Through in depth franchise development plans to well executed market entry strategies, and localised Market research, Astreem is confident in bringing effective and result oriented solutions for brand growth.

For more information on taking your business to Indonesia, contact [email protected] or +65 6732 0803.