IS FRANCHISE A PROSPECTIVE BUSINESS? THE CASE OF LAUNDRY BUSINESS IN PALANGKA RAYA

• Main Author: Rianto, Boby
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/51869
• Institution: Institut Teknologi Bandung

Micro, Small, and Medium Enterprise (MSME) is a business sector that has a vital role to play in the national economy. MSMEs are the backbone of a country's economy in the face of various crises. In the economic crisis that occurred in Indonesia in 1998, many large-scale businesses were bankrupt, but the MSME sector proved resilient and has a muscular endurance in facing the crisis. The role of MSMEs in the Indonesian economy is shown by its role as a business actor the biggest and its contribution to employment, the formation of gross domestic product (GDP), exports, and creation of fixed capital or investment. Based on Statistics Indonesia (BPS) data in 2018, the number of MSMEs in Indonesia continues to increase ever y year. In 2016, the number of MSMEs was 57,900,000 units, and in 2017 the number of MSMEs grew to over 62,000,000 units, and the latest data in 2018 reached 64,198,000 units. The service sector is one of the sectors that provide Indonesia's largest GDP, at 5.7%. A franchise is one of the immensely popular business models in the world, including in Indonesia. This business model is common because franchising brings many benefits to the franchisor and franchisee. According to the Indonesia Franchise and License Association (WALI), in 2018 franchise business sector grew over 3% with accumulated revenue of 150 trillion rupiahs. Three main sectors are expected to proliferate, culinary (food and beverages), services, and retail. The food and beverage sector dominated the franchise business in Indonesia, with 40% of total franchise brands. WALI noted over two thousand franchise brands in Indonesia are coming from domestic and international brands with 65% and 35% of each presentation. This study aims to analyze the profitability of the laundry business franchise (YUKITACUCI) investment in the MSME sector. The calculation is including total investment needed, profitability, and risks of the project to create a suggestion for an investment decision. This study will use capital budgeting techniques with parameters for analyzing project’s profitability are Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period (PP), and Profitability Index (PI). The financial model was based on many assumptions that are obtained from several perspectives and approaches. Risk analysis was also conducted to find variables that may affect the business profitability using sensitivity analysis and scenario analysis. This study resulted in the project being feasible in financial terms with a total investment of IDR 101.6 million. The project potentially resulting NPV at IDR 157.1 million and IRR value at 39.35%. Investments will payback in under two years of business operation with a profitability index of 2.55. Risk assessment resulting number of laundries served as the most sensitive variable for the NPV changes, and Inflation is the least variable affecting the change NPV with a 1.9% swing in NPV changes. The franchisee could boost marketing in the early stage of business operations to raise brand awareness among citizens in the area. Online advertisements through Facebook Ads or Instagram Ads could be the platform to boost marketing in the early stage. Using scenario analysis with a 20% swing on each variable on the scenario, the best scenario (+20% swing) of this business can generate NPV of IDR 478,560,039.44 and the worst-case (-20% swing) scenario will result in an NPV of IDR (109,028,739.96).