CHAPTER I
INTRODUCTION
1.1
Background
Franchise
business is the business activities the sale of goods in retail to the public
at large, so the popularity of these business activities, resulting in fast
growing and covers many different types of businesses. Business franchising was
introduced first by Isaac Singer songwriter sewing machine brand Singer in 1851
in the United States. In Indonesia, business sales in the retail franchise kind
of started to be developed, many emerging businesses-local businessman glanced
at the sale of goods or services as a franchise. In Indonesia, business systems
sales in great demand by franchise businesses of foreign franchises where they
gave permission to the local businessmen to manage this foreign franchises and
certainly would be incurring a heavy for a rival small local entrepreneurs
engaged in similar business fields.
1.2 Problem Statement
1.
What are the advantages and
disadvantages of Franchise Agreement Franchisees and the Franchisor 's?
2.
How to franchise
business development both in Indonesia and in the world?
1.3
Objectives of The Paper
1.
To know the
advantages and disadvantages of Franchise Agreement Franchisees and the
Franchisor's Franchise Agreement law basis;
2. To
know the franchise business development both in Indonesia and in the world.
1.4
Significance of The Paper
The primary
benefit that can be gained from a franchise are:
1.
Offers benefits (profit);
2.
Prospective franchise businesses are
given training in trying;
3.
Employees, raw materials, standard
tools needed in business franchise is provided for free by freencisor;
4.
Businesses that run rapidly developed.
Because with more and more companies are using the franchise means running
businesses will quickly known society, the society also easily obtain products
at standard quality and want equal;
CHAPTER II
PARTINENT IDEAS
2.1
Review of Literature
2.1.1
The History of a Franchise
Franchise first started in America by the Singer
Sewing Machine Company, a manufacturer of sewing machine in 1851. That pattern
is then followed by General Motors company Automotive Industry who make sales
of motor vehicles by appointing distributors franchise in 1898. Next, followed
by the soft drink companies in America as distribution channels in the u.s. and
other countries. Whereas in the United Kingdom the franchise was founded by j.
Lyons through his Wimpy and the Golden Egg on the Decade of the 60 's.
The Franchise quickly became the dominant model in
distribute goods and services in the United States. According to the
International Franchise Association, now this is one of the twelve business
trading in the United States is the franchise. Franchise absorb eight million
workforce and achieve a forty-one percent of the entire retail business in the
United States (David Hess, 1995: 333). 'S Franchising is then grown rapidly
because of this marketing method used by many different types of businesses,
such as restaurants, retail businesses, hair salon, car dealerships, hotels, petrol
stations, etc. (Robert w. Emerson, 1994: 920).
In Indonesia the franchise is known since the 70 's
when the influx of Shakey Pisa Swensen, KFC, and Burger King. Its looks very
rapidly started around 1995. In 1997 recorded Data about Deperindag 259 recipient
company franchise in Indonesia. After that, the franchise experienced a slump
because of the efforts going on the monetary crisis. Recipients of foreign
franchise his business forced to close because of the value of the rupiah are
mired deeply in. Until 2000, the alien franchise still waiting to go to
Indonesia. It is due to the political and economic conditions that have not
been marked as stable with political elites feud. It was only in 2003, business
franchise in the country is experiencing a very rapid development.
Franchise can be distinguished in two forms, namely
product and trade and business format franchise franchisees. In a form that
gives license to the franchisor's first franchise to sell the franchisor's
products. An example of the first shape is a car dealership and petrol station.
In the form of the latter, namely the business format of franchisees, gives the
whole concept of a franchisor's business covers marketing strategies,
guidelines and standards for the operation of the efforts and assistance in
operating the franchise. Thus franchisees have an identity that is inseparable
from the franchisor's (David Hess, 1995: 337).
In general form is used in businesses such as
fastfood restaurant Kentucky Fried Chicken, Pizza Hut, Mc Donald, Hotel, and
car rental services. This form is used for foreign market Indonesia
franchisor's attack and is used also by local businesses such as the Es Teller
77, Rudi Hadisuwarno Salon, the roads were Berek, etc.
2.1.2
Definition
of Franchise
Before
peeling the aspects of Franchise Business pattern, it's good displayed in
advance some understanding of the Franchise.
European
Code of Ethics for the definition of Franchise's Franchising provides as
follows:
“..is
a system of marketing goods and / or services and / or technology, which is
based upon a close and ongoing collaboration between legally and financially
separate and independent undertakings, the Franchisor and its Individual
Franchisees, where by franchisors grants its Individual Franchisees the right,
and imposes the obligation, to conduct a business in accordance with the
Franchisor’s concept.”
Whereas
according to the IFA, the franchise is:
“..Continuing
relationship in which the franchisor provides a licensed privilege to do
business, plus assistance in organizing, training, merchandising and
management.”
Franchise
in the meantime, according to REGULATION No. 16/1997 franchise is defined as
the Alliance where one party is given the right to capitalize and or to use
intellectual property or invention or hallmark business owned by another party
with a reward based on requirements set these other parties, in the framework
of the provision of and or sale of goods and or services. This definition
applies to raw juridically formalized in Indonesia.
Based
on the above , in some sense we concluded that the franchise is a license from
owner of a trade mark or trade name permitting another to sell a product or
service under that name or mark.
2.1.3
Elements
of Franchise
1.
Must
have a brand name (including derivatifnya): Logo, motto or a company;
2.
Must
have a business system that can be duplicated. The system can duplicate the
device is all business operations; includes the standardization of its
products, services or methods of pengolahannya method, a standard ad,
Financials system, system control inventory and so on;
3.
Any
charge or fee is paid. Costs associated with this is the initial franchise fee,
initial cost, any initial investment to its name, which is associated with the
franchise agreement;
4.
The
existence of the initial training. Training is ongoing, organized by the
franchisor's in order to increase skill.
2.1.4
Legal
Basis
In
consignment processing, the vendor remains the legal owner of the material
until materials is not withdrawn from the consignment stores or it is not
transferred to company’s own stock. Once it is withdrawn or transferred to
company’s own stock, the ownership also got transferred to the tune of quantity
withdrawn or transferred.
1.
Franchise.
The Treaty as the legal basis of article 1338 KUH civil code (1), 1233 s/d 1456
KUH civil liability; the parties are free to do whatever as long it does not
conflict with any applicable law, custom, propriety or other things related to
public order, as well as about the terms of the Treaty as valid etc;
2.
The
law of Agency as a legal basis; KUH Trademark (Middleman & amp;
Commissioner), provisions which are such a wide range of conditions from the
administrative Department of industry, trade, etc. Often determined by contract
firmly in the franchise that among the parties with the franchisor's
franchisees does not exist a relationship Agency;
3.
Trademark
law, patent and copyright as a legal basis; Apropos join causes trademarks and
logos belong to the franchisor's Party in a business franchise, let alone the
possible existence of a new invention by a franchisor's Party, the discovery of
which can be patented. Act No. 19 (1992) brand, Act No. 6 (1982) patents, Act
No. 7 (1987) copyright;
4.
Foreign
capital investment LAW as the legal basis; If the franchisor's Party will open
an outlet in a country that is not a country, the franchisor's party should
dikonsultasi first to the foreign capital investment law experts about a wide
range of possibility and alternative which might be taken and most his favor.
Franchise is precisely selected to avoid specific prohibitions for a foreign
company to operate via direct when the investment;
5.
Other
Rules as other legal basis:
a) Administrative law Provisions, such
as the licensing of businesses, the establishment of a limited liability
company, etc. generally administration regulations issued by the Department of
Commerce. Kepmen Trade No. 376/Kp/XI/1983 about the activities of the trade;
b) Conditions of employment;
c) Company law (UU PT No 1 (1995));
d) Tax law-is there a double tax,
income tax, value added tax, withholding tax on royalty and income tax on
foreign labor;
e) The law of competition.
2.1.5
Franchise
Types
1. Product Franchise
Manufacturers
use the product franchise to govern how a retailer distributes their product.
The manufacturer grants a store owner by the manufacturer and allows the owner
to use the name and trademark owned by the manufacturer. The store owner must
pay a fee or purchase a minimum inventory of stock in return for these rights.
Some tire stores are good examples of this type of franchise.
2. Manufacturing Franchises
These
types of franchises provide an organization with the right to manufacture a
product and sell it to the public, using the franchisor’s name and trademark.
This type of franchise is found most often in the food and beverage industry.
Most bottlers of soft drinks receive a franchise from a company and must use
its ingredients to produce, bottle, and distribute the soft drinks.
3. Business Opportunity Ventures
These
ventures typical require that a business owner purchase and distribute the products for one specific
company. The company must provide customers or accounts to the business owner,
and, in return, the business owner pays a fee or other consideration as
compensation. Examples include vending machine routes and distributors.
4. Business Format Franchising
This
is the most popular form of franchising. In this approach, a company provides a
business owner with a proven method for operating a business using the name and
trademark of the company. The company will usually provide a significant amount
of assistance to the business owner in starting and managing the company. The business
owner pays a fee or royalty in return. Typically, a company also requires the
owner to purchase supplies from the company.
2.1.6 Elementsin Products
that was Found in
the Franchise
1. Franchisor is the owner or
manufacturer of goods or services have certain brands , and give the rights or
lease certain to marketing executive of goods or services;
2. Franchise that the receiving party
executives from the right of the franchisor;
3. The rights cession ignominiously
executive (in practice covering of various kinds of intellectual property
rights or rights belonging to industry) of the franchisor to franchisee;
4. The determination of a specific
area, the area where franchisees franchise is granted the right to operate in a
particular area. Example: only allowed to operate in Java;
5. The existence of financial-feats of
franchisees to the franchisor's in the form of initial fee and royalties as
well as other costs agreed upon by both parties;
6. The existence of a standard quality
defined by the franchisor's for franchisees, as well as supervision at regular
intervals in order to maintain quality;
7. The initial training, continuous
training, organized by the franchisor's in order to increase skill.
2.1.7
Step Make Business Franchise
1.
Making Thew Effort make it a business or businesses that
have an identity. A business that has the identity that is a business that has
a characteristic or differentiating power compared to other businesses. This is
the main requirement. Although our talkative by developing business franchise,
does not mean we are free imitation. Removing the products fried chicken fried
in cooking oil use is the action that is not wise. Might be better off removing
the products fried chicken fried in sand, for example.
2.
Create a standard Operation of Baku in order to dikembangbiakkan
everywhere in quick time, we should have a standard operation of baku. Weakness
of the majority of entrepreneurs of SMES are creating standard operation. It is
not difficult to make standard operation of baku. As long as we understand the process
and want to jot down that process on paper, be the standard operation of baku
in its simplest form. The rest of our lives operating standards package
standard it in book form (can ask for help to the author or the constituents of
the system);
3.
Creating intellectual property rights (HAKI) one of
the weaknesses of the SME entrepreneurs who protect the rights are rarely
intellectual factors, either because of ignorance and assumption that take care
of HAKi is expensive because it relates to bin ribet bureaucracy. Whereas
business franchise that is supplied is his INTELLECTUAL PROPERTY. So now to
register your trademark, patent, copyright, industrial design at tau Ditjen
HAKI Depkumham. The cost is quite affordable. You can ask for help on existing
INTELLECTUAL PROPERTY consultants in each College;
4.
Make the way Easy Duplication & amp; The
practical one of the keys to our business easily dikembangbiakkan is the way
the duplication that is easy and practical. We must devise a way to allow
others to duplicate our efforts easily. This duplication systems are usually
encapsulated in the system of training. How to make it easy. Write down just
how others are able to do our business quickly and precisely;
5.
Make a profit Growing Business not worth
dikembangbiakkan if it is still loss-making, so the only way that the business
is worth dikembangbiakkan is making profits grow. Growing profits obtainable if
within certain business we have a tendency to print continuous profit.
Therefore, do not hesitate assign target revenues, strive always hit the target
and always raise the target for the next period of time. So on. Try the
business do not experience a loss;
6.
Make Supporting Sustainable Management one of the
franchisor's obligations are very important in mengembangbiakkan her business
is to provide supporting sustainable management for the duration of a contract
to its franchisees. So our efforts began to develop, as soon as we fix the
internal company. Use a professional business organization to handle the
effort. Improve their skills in order to continue to provide the support needed
by management of the franchisees;
7.
Create a Business Prospectus If the conventional
business we are used to sell services or goods, it is in our franchise business
selling his business. Here it takes more than just a brochure. We require a
business prospectus that prospective business partners we are able to see
bright prospects of the business. How to make it almost identical to make
business proposals, only the business usually enclosed with the prospectus
financial statements for some specific period which shows our company profit.
If it is not capable of compiling its own prospectus business, we can use the
services of a consultant with affordable fees;
8.
Making Indonesia Franchise Agreement has the freedom
of berkontrak. We are free to create and compose business cooperation
agreement. Making agreement franchise is the same as making regular cooperation
agreement. Franchise agreement there are few things specially regulated, i.e.
what type of INTELLECTUAL PROPERTY that are franchise-kan, whatever his
business activities, how supporting management done, anywhere business area
exchanged, how the procedures for the payment of the cost of the franchise, as
well as how ownership, changes of ownership and the right of the beneficiary if
the franchisees franchise contract died before end;
9.
Create a business entity or entities it's franchise
business law requiring complex business organizations in the form of a business
entity or legal entities. Bentuklah business entities or legal entities. Can be
in the form of a CV or PT We can no longer run a business individually if you
want to difranchisekan.
2.2
Discussion
2.2.1 The Advantages and Disadvantages of
Franchise Agreement Franchisees and The Franchisor
a) Advantages for
the Franchisor's (The Parent Company)
1) The
product or service is distributed widely without the cost of promotion and
investment costs of new branch;
2) The
product or service is consumed with the same quality;
3) Profits
from royalties or licensing sellers;
4) His
business could expand rapidly in many locations simultaneously, increased
profits by leveraging the investment of franchisees.
b) For Franchisees
(owner of resell rights):
1) The popularity
of the products or services have been known to consumers, saving the cost of
promotion;
2) Get some
management facilities in accordance with training conducted by the franchiser;
3) Get the image
together with the parent company.
c) Loss for franchisee
( rights holders sell ):
1) Startup costs
costæ a high because its investment needs beginning , franchisee have to pay
for purchases franchise which is usually enough expensive;
2) Franchisee not
free developing its business because various regulations given by franchisor;
3) Franchisee
usually attached to purchase materials for production to of standardized
products / services sold;
4) A franchisee not
being stuck on the agreement with franchisor , because anywise usually
agreement will be inclined to the principal / franchisor by comparison 60 : 40
. The income continue to flow into franchisor of royalty and sale of advice to
franchisee more important is the source of income from the initial cost to sell
franchise . Thus , franchisor and franchisee reach success with help each other.
2.2.2
Development of Franchise
Business Both
in Indonesia and in The World
a.
Franchise business development in Indonesia
1) Development of franchise in the
1970s: the existence of KFC, Swensen, and Shake Pisa in the 1970s, led to the
presence of such a concept's franchising or better known as the franchises in
Indonesia, followed by Burger King and Seven Eleven;
2) The development of franchise
Business franchise in the 1980s experienced growth during this era. This is
evident with the introduction of various business franchise in 1985 mainly on
food business, such as: Pizza Hut, Mc. Donald, in the business of retail such
as: Carefour, Smart etc;
3) Franchise development in the 1990 's
, franchise development in indonesia , the more significant into the 1990 's
especially of the franchise , which comes from abroad which totaled 29 6 the
franchise , which comes from domestic and mines-prone less than 300 outlets in
the country in 1992 . Franchise attract investors , especially foreign
investors to participate in invest their capital in indonesia because it had
been think that the indonesian economy is getting better , which has been
stable political and security can be guaranteed . In 1997 , while the number of
increases back with 235 franchise come from foreign and local franchise 30 so
if dijumlah to 265 with 17,379 outlets sebanyak more or less 2000 . But in 1998
franchise industry in indonesia to fall due to the economic crisis in this
country in 1997 . This condition leading to a lot of foreign investors (
franchisor ) hengkang from indonesia and more or less 500 outlet had to be
closed for the condition that does not allow this . But conditions like this in
fact favorable to indonesia because its local market began in the franchise
than 30 trademark of being 85 which evolved;
4) Franchise development in the 2000an-sekarang
: entering twentieth century franchise development in indonesia is increasing .
Particularly in the franchise local which annually to rise . As for business
franchise foreign relative stable because only decrease and gains not high
enough.
b.
Franchise business development in The World
The word
franchise stems from old French which means it is free. In the middle ages
franchise is defined as a prior right or freedom. At that time, the local
government or special rights, such as the lord gave to operate the ferry or for
hunting in his possession. At that time the franchise known as the overall
business activities aimed at building roads, brewery. In essence, the King gave
the rights to monopoly to a person in the performance of a particular business
activity. Around the 1880s large cities began to give the right to public works
and equipment maintenance for water, sewer, and gas procurement.
Franchise
concepts developed in Germany in the 1840s. then, have started to be given the
rights to sell beverages drinks. This is the beginning of a concept's
franchising we know today. The concept of franchise experience very rapid
developments in the United States, starting in 1951 the singer sewing machine
company in the United States began providing distribution franchise for sale
sewing machines. For about the 1960s and 1970s happened a lot of abuse of the
franchise is going because the amount of demand for goods and services is
increased due to the baby boom. Along with this, the concept of franchise also
thrives in the United States. Many people are tempted to run a franchise
business concept.
Franchise business models such as
irregular as well as containing high risk requires a change, for it established
The International Franchise Association (IFA). IFA created a code of conduct to
be observed by its members. IFA in cooperation with the Federal Trace
Commission (FTC). IFA and FTC team up in order to improve the image of the
franchise as well as improving the relationship between franchisee and franchisor
's. In 1978, the FTC issued a document governing the franchise, this document
is known as The Uniform Offering Circular (UFOC). The contents of the UFOC will
hopefully help the franchisees in taking the decision to start business through
franchise.
CHAPTER III
CONCLUSION AND SUGGESTION
3.1
Conclusion
Based on things that have pointed out above,
the conclusion is
1.
Drawn
that the legal business franchise (franchise) is very dependent upon the
suitability of the franchise business and business system as well as their
collaboration with Islamic principles of mechanism and the absence of any
challenge Syariah in business is however in General. Doing business via
franchising is a good way to try, because this method also brings advantages
for the parties.
2.
The Advantages and Disadvantages of
Franchise Agreement Franchisees and The Franchisor
a) Advantages for
the Franchisor's (The Parent Company)
1) The
product or service is distributed widely without the cost of promotion and
investment costs of new branch;
2) The
product or service is consumed with the same quality;
3) Profits
from royalties or licensing sellers;
4) His
business could expand rapidly in many locations simultaneously, increased
profits by leveraging the investment of franchisees.
b) For Franchisees
(owner of resell rights):
1) The popularity
of the products or services have been known to consumers, saving the cost of
promotion;
2) Get some
management facilities in accordance with training conducted by the franchiser;
3) Get the image
together with the parent company.
c) Loss for franchisee
( rights holders sell ):
1) Startup costs a
high
2) Franchisee
usually attached to purchase materials for production to of standardized
products / services sold;
3) A franchisee not
being stuck on the agreement with franchisor.
3.2
Suggestion
As
for which must be made by prospective franchisees to be able to know the
prospects franchise to be bought, among others:
1. take a look at the business that has been
running, whether successful or not. Successful or whether a business in detail
can be seen from the financial statements of the company.
2. take a look at what was the attraction of the
business. What is your business that can attract more visitors compared to
similar business. This is important because in a market the goods or services,
or the uniqueness of the main thing in the interest of visitors.
3. thorough is the company already has a system
and standard procedure in the conduct of its business. These systems should be
tested is able to troubleshoot problems that may occur in field. In addition
promotion program conducted by the franchisor's should be known by franchisees,
since this promotion is very influential to the continuity of the business.
4. find out how many franchisees who run
a franchise, and if possible to seek information from the franchisees of it on
businesses that are already running, support from the franchisor's in
troubleshooting and the prospect of the fore regarding business.
5.
find out about other franchise is moving in the same line of
business, what are the advantages and disadvantages of these franchise we are compared to the viewfinder, to get a
more objective in determining choice. Does anyone know any other franchise that
has better prospects.
REFERENCES
Malik, Vinay Kumar, 2012.
Franchase
Paper [Internet], <http://www.it.toolbox.com/doc-francase, access on 20th
of May 2012
Internet Brands
Company,
2012. Franchasor
and Franchasee [Internet], <http://www.finweb.com, access on 22th
of May 2012
