Opening a restaurant is a popular business venture for foreign companies in many countries and Indonesia is no exception.
While this market offers many opportunities, navigating the regulations and successfully completing company set-up in Indonesia is difficult without a local partner.
Indonesia’s economy has been experiencing rapid growth recently, following with the emerging population of middle class and affluent consumers (MAC). According to Boston Consulting Group report in 2013, there are currently about 74 million MACs in Indonesia, and it will double by 2020 up to 141 million people. Despite the weakened rupiah and falling of oil prices, domestic demand remains strong with most consumption are segmented into goods, vehicles, durable services, hotels and restaurants. The increasing busy and hectic lifestyle in urban areas is one of the factors for this high consumption. People have less time to do household work, includes cooking; hence, choosing restaurants or home delivery is convenient option to enjoy the daily activities.
By seeing the current vibe among Indonesian society, opening up restaurants or cafes is auspicious business venture for local or foreign investors. In 2013, the hotels and restaurants industry contributed 14.33% of Gross Domestic Product (GDP) for Indonesia. It was the third largest contributor after manufacturing and agriculture. The industry is very diverse, ranges from high-end hotels and restaurants that serve international cuisine to local low-end restaurant and warung. Foreign investors will have various options whether they want to open chain or independent restaurant.
Opening a restaurant is not much different from registering another type of company in Indonesia. At the first stage, the business must set up a Direct Investment Company. This is basically a limited liability company (LLC) called Perseroan Terbatas (PT) in Indonesian. For foreign investors, there is also PMA—Penanaman Modal Asing – it is the only way to do foreign-owned company registration in Indonesia.
Any business that has foreign shareholders must register as a PMA. Some market sectors have percentage requirements for Indonesian ownership. Based on the newly revised Indonesia Negative Investment List 2014 (i.e. Daftar Negatif Investasi), foreign investors who want to open restaurant are allowed to have 51% ownership of their business, while the rest of 49% will belong to local shareholder. In certain situations when the foreign investors are not ready to full fill all requirements for PAM company registration, foreign investors still have alternative option by establishing a local nominee company in form of local limited liability (i.e. Perseroan Terbatas) with 100% local shareholders which will be under his control.
To complete company registration in Indonesia, a firm must get approval to invest from the country’s Investment Coordination Board (BKPM).
After getting the company registered, investors should fulfill required documents for hotels and restaurant industry, such as:
- Building permit (i.e. Izin Mendirikan Bangunan): it is a state administrative decision for any individual who is qualified to expand, reduce, maintain, and modify the building.
- Nuisance law (i.e. Undang-Undang Gangguan): it is a business permit for an individual or entity on specific location that the appointed location is not potentially dangerous provoking loss, disturbance, peace and public order.
- Business license: it is required before performing commercial activities
- Restaurant license
- Working visa
To get restaurant license, the company should have determined about the exact location of their business. The duration of whole process from company registration to restaurant license generally takes around six months. While this part of the process can be fairly quick, it is an important first step that needs meticulous responsiveness. Some investors usually ask local consultant to assist with researching documents and preparing the investment approval paperwork more efficiently. Once the investment plan and the procedure are complete, the business can start. Moreover, investors may refer the regulations to Ministerial Regulation of Ministry Culture and Tourism No. PM. 87 /HK.501/MKP/2010.
Certain segments of hotels and restaurants industry are very competitive, especially on chain restaurant industry. Several global chains that have been successfully established in Indonesia market are McDonald’s, KFC, Pizza Hut, and Starbucks. While most of global chain is dominated by Western brands, some Asian brands like Yoshinoya and Café Benne are now getting more loyal customers, mostly young people. By applying good strategies and understanding about customers’ preference, there is always big chance for investors to win in this business.
Cekindo has extensive experience in handling all steps related to the restaurant PMA company registration process, including preparing the articles of incorporation and deed establishment and licenses for cafes, restaurants and hotels.
Please contact Cekindo for more details.
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