Indonesia holds one of the largest growth potentials in the Food and Beverages (F&B) business within ASEAN, driven primarily by a population exceeding 270 million, a burgeoning middle class, and the pervasive fear of missing out (FOMO) prevalent among younger generations. In line with this, the domestic F&B sector has demonstrated strong and dynamic performance, reaching an estimated market value of approximately IDR 1.4 quadrillion with growth rate of around 8.5% per year. This robust development, combined with the country’s overall demographic and economic trends, presents compelling opportunities for both new market entrants and existing industry players seeking expansion. Consequently, investors may find Indonesia an attractive jurisdiction in which to explore, develop, and ultimately establish their own F&B ventures.
Based on the above market outlook, this article aims to provide readers with an overview of the key characteristics of the Indonesian F&B sector including applicable licensing requirements, regulatory considerations, and principal risks associated with operating an F&B business in Indonesia.
- General Business Structure
The F&B sector in Indonesia encompasses a diverse range of business structures, among others:
- Start-up: a newly established business that seeks to introduce an innovative products or services. Start-up typically operate with limited capital and resources, which may give rise to heightened operational and scalability challenges compared to more mature businesses. Their success often hinges on agile management, the ability to differentiate their offerings, and sustained access to financing.
- Family-owned business: a business owned and managed by family members or close associates, often emphasizing long-term continuity, preservation of legacy, and controlled growth. While they may benefit from strong internal cohesion and shared values, these businesses may also face constraints in terms of professionalization, succession planning, and capital injection.
- Franchise or licensing chains: a business model in which one party (the franchisor or licensor) grants another party (the franchisee or licensee) the right to use certain intellectual property—such as trademarks, trade names, proprietary recipes, or operational know-how—in exchange for fees, royalties, and compliance with prescribed operational standards. This structure enables scalable expansion while maintaining brand consistency but also requires robust contractual arrangements and continuous oversight to mitigate reputational and operational risks.
Beyond their ownership or business model, F&B enterprises may also operate under various commercial manifestations, such as restaurant, food stall, bar, café, catering service, etc.
- Business License and Required Permits
Business Classification
Every business activity in Indonesia must be classified under a specific classification code known as the Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia/ KBLI).
F&B businesses generally fall under the KBLI code of ‘56’. Several examples of F&B business activities regulated under this type of KBLIs are, among others, (i) 56101 – Restaurant; (ii) 56102 – Food stall; (iii) 56301 – Bar; and (iv) 56303 – Café.
Under the KBLI framework, the business scale of an enterprise – whether classified as micro, small, medium, or large enterprise – plays a central role in determining the applicable licensing requirements for each activity. Although businesses may operate under the same KBLI code, their compliance requirements differ depending on their scale, which is generally assessed based on indicators such as capital and annual revenue. The following are the business scale applicable to F&B sector:
- KBLI 56101 – Restaurant, which open to micro, small, medium, and large enterprises;
- KBLI 56102 – Food Stall, which is limited to micro and small enterprises;
- KBLI 56301 – Bar, which may only be operated by medium and large enterprises;
- KBLI 56303 Café, which open to micro, small, medium, and large enterprises
The licensing requirements are primarily governed under Presidential Regulation No. 10 of 2021 on Investment Business Sectors as amended by the Presidential Regulation No. 49 of 2021 (Presidential Regulation 10/2021), Government Regulation Number 28 of 2025 concerning Risk-Based Business Licensing (GR 28/2025), and other sector-specific regulations.
Risk Level and Licensing Requirements
Under GR 28/2025, all business activities must obtain licenses according to their assessed risk level. The categories are:
- Low risk business which shall possess a Business Identification Number (Nomor Induk Berusaha/NIB);
- Medium-low risk business which shall possess an NIB and a non-verified Standard Certificate;
- Medium-high risk business which shall possess an NIB and verified Standard Certificate; and
- High risk business which shall possess an NIB and business license.
F&B businesses generally fall within the low to medium-high risk categories under GR 28/2025, depending on the specifications and scale of the business. For instance, KBLI 56101 – Restaurant categorizes micro enterprise with a medium-low risk category, and small, medium and large enterprises with a medium-high risk category.
Other Licenses
In addition to the NIB and Standard Certificate, F&B operators may be required to obtain additional licenses depending on their specific KBLI and operational activities, such as, the Hygiene and Sanitation Feasibility Certificate, Direct Sales Permit for Alcoholic Beverages, Food Hygiene and Sanitation Label, Health Feasibility Certificate, and/or Halal Certificate.
Foreign Ownership Restriction
F&B businesses classification is also relevant to determine investment restriction, such as foreign ownership restriction. Under Indonesian investment regulations, foreign investors are prohibited from engaging in business activities designated for micro, small, and medium enterprises. Consequently, foreign investors cannot operate businesses under KBLI 56102 (Food Stall). However, they may participate in business activities classified under KBLI 56301 (Bar) or other F&B sectors that are fully open to large enterprises.
- Franchise vs License
Franchise and license differ significantly in terms of legal requirements, scope of control and operational structure although both involve transfer of certain rights from one party to another.
- Franchise
Under Government Regulation No. 35 of 2024 on Franchise (GR 35/2024), a franchise is defined as a special right held by an individual or business entity over a business system that meets predefined criteria and has demonstrated commercial success, which may be utilized by another party pursuant to a Franchise Agreement.
Article 4 of GR 35/2024 requires that a business meet the following criteria to qualify as a franchise:
- Existence of a business system;
The franchisor must have a comprehensive written business system that provides, at minimum, information on: (i) human resources management; (ii) administrative procedures; (iii) operational management; (iv) standard operating methods; (v) criteria for site selection; (vi) design of business premises; (vii) employee qualifications; and (viii) marketing strategies. The system must be capable of being taught, replicated, and implemented consistently by franchisees.
- Demonstrated profitability;
The underlying business must have been in continuous operation for at least three consecutive years, and the franchisor must possess two years of audited financial statements showing profits, with an unqualified audit opinion from a public accountant.
- Ownership of registered or listed intellectual property; and
The franchisor must own the relevant IP—such as trademarks, copyrights, patents, trade secrets, or other forms of IP—which forms the core of the franchised business.
- Provision of continuous support from franchisor to the franchisee
The franchisor shall be obliged to provide a continuous support to the franchisee in the form of: (i) training; (ii) operational management; (iii) promotional support; (iv) research; (v) market development; and (vi) other forms of development.
From a licensing and administrative perspective, franchisors must deliver a Franchise Offering Prospectus (Prospektus Penawaran Waralaba) to prospective franchisees at least 14 days before executing a franchise agreement. Furthermore, both the franchisor and the franchisee must obtain a Franchise Registration Certificate (Surat Tanda Pendaftaran Waralaba – STPW) prior to commencing operations.
Despite the challenges, franchising remains a popular strategy for new business owners lacking prior experience in the food and beverage industry, particularly those seeking to leverage established international brands.
- License
In contrast to franchise, under Government Regulation No. 36 of 2018 on Recordation of Intellectual Property Licensing Agreements (GR 36/2018), license is defined as the rights granted by an IP holder to another party for the utilization of a certain IP pursuant to a license agreement. The licensed IP must be under valid protection at the time of the grant. In the F&B business, the license can be granted in the form of trademarks, patent, or trade secret (as applicable).
From a regulatory standpoint, a license becomes legally effective upon satisfaction of two principal requirements: (i) execution of a license agreement compliant with GR 36/2018; and (ii) recordation of the agreement with Ministry of Law, followed by public announcement.
Licenses are, by design, more flexible than franchises. As opposed to franchise scheme which provides strict business system qualifications under GR 35/2024, GR 36/2018 imposes only minimal substantive restrictions on licensing terms, prohibiting arrangements that: (i) harms Indonesia’s economy or national interests; (ii) hinder the capacity of Indonesians to transfer, control, or develop technology; (iii) results in unfair business competition; and/or (iv) contravene laws and regulations, religious values, morality, or public order. Other than these limitations, the parties enjoy broad discretion in defining the scope, territory, exclusivity, financial arrangements, and operational obligations under a licensing agreement.
- Risk Factors in F&B Industry
F&B businesses inherently face a variety of risks. Key examples include:
- Legal Compliance Risk;
Regulatory developments in Indonesia are frequent, requiring business actors to consistently update their licenses and align their operations with new requirements.
An illustrative example is the enactment of GR 28/2025, which replaced Government Regulation No. 5 of 2021 on Risk-Based Business Licensing (GR 5/2021). Whereas GR 5/2021 classified the risk level for KBLI 56101 (Restaurant) based on the number of seats, GR 28/2025 now determines risk based on the scale of business, representing a shift in the regulatory approach.
- Manpower Risk;
F&B businesses typically rely on a sizeable workforce, which poses various manpower-related risks:
- Minimum Wage Adjustment
Compliance with minimum wage requirements is mandatory under Law No. 13 of 2003 on Manpower, as lastly amended by Law No. 6 of 2023 (Manpower Law). Wage increases, although legally required, may significantly affect operational costs and thereby impact profitability. Each region in Indonesia has different regulations concernign the minimum wage requirements.
- Labor Disputes
Disputes may arise from issues relating to employment status, health benefits, overtime compensation, or other statutory entitlements. Such disputes may damage the company’s reputation, disrupt operations, delay achievement of production targets, increase operational expenses, and reduce revenue.
- Licensing for Specific Workers
Certain manpower arrangements—particularly the employment of foreign workers—require additional regulatory compliance. F&B business employing foreign workers must obtain a Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing – RPTKA) under GR 28/2025 and Government Regulation No. 34 of 2021 on the Recruitment of Foreign Workers.
- Business Competition Risk;
Indonesia’s F&B sector is characterized by low entry barriers, enabling rapid market entry by new competitors. Because F&B operations often do not require specialized skills, advanced technology, or substantial initial capital, competitive pressures are intense. An operator that fails to adapt to evolving consumer preferences or innovate its concept may face material adverse impacts on its financial performance and long-term viability.
- Dependence on specific restaurant brands;
All F&B businesses rely heavily on their trademarks as a key element of consumer recognition. In Indonesia, it is common for a single company to own several restaurants operating under different trademarks. However, some of these companies depend financially on only a few of their restaurants rather than the entire portfolio. There is, for example, a case of an Indonesian company that owns numerous restaurants, yet the majority of its net income is generated by only one or two of those establishments.
Brand strength is essential in the F&B market as key element of consumer recognition. Many companies operate multiple restaurant brands, yet rely financially on only a few flagship establishments rather than entire portfolio, which may create revenue concentration risks over time.
- Halal Certificate;
Given Indonesia’s predominantly Muslim population, halal compliance is a critical operational requirement. Government Regulation No. 42 of 2024 on Halal Product Assurance (GR 42/2024) mandates that all products entering, circulating, or traded in Indonesia must be halal certified, except non-halal products.
GR 42/2024 provides phased compliance deadlines: (i) medium and large F&B business: required to obtain Halal Certificate by 24 October 2024; and (ii) micro and small business: required to obtain Halal Certificate by 17 October 2026.
The certification process requires product testing, inspection of raw materials, establishment of a Halal Assurance System, and approval by the Indonesian Ulema Council (Majelis Ulama Indonesia – MUI). Each outlet must obtain and maintain its own halal certificate, with separate applications required for each location. This creates significant administrative and operational obligations.
- Logistic and distribution Risks;
Supply chain disruptions—whether due to shortages, transportation delays, or price volatility—may affect the availability and cost of raw materials. F&B operations, particularly those relying on fresh ingredients or imported products, are especially vulnerable.
- Claim and Litigation Risks;
Customer complaints, food safety incidents, contractual and IP disputes, and regulatory infractions may give rise to claims or lawsuits. Litigation may result in financial liabilities, reputational harm, and operational restrictions.
- Regulation from other country;
For businesses operating cross-border or importing/exporting ingredients, exposure to foreign regulatory requirements—including food safety standards, labelling, and customs rules—can result in additional compliance burdens and potential liability.
- F&B Franchise or Licensing Risks.
Franchise and licensing arrangements remain prevalent in the F&B industry but carry inherent risks. Key concerns include the duration of franchise/licensing agreements, renewal uncertainty, potential breaches, and fluctuations in market interest toward the franchised brand. Termination or non-renewal of a franchise or license can force operators to cease operations entirely.
- Success Story
The F&B industries may be blooming recently due to the newly adoped café hopping cultures in Indonesia but the success stories of an F&B entepreneur have been established since the 1990s. PT Fast Food Indonesia Tbk, which introduced the famous Kentucky Fried Chicken (KFC) to Indonesia through a franchising model has sucessfully conducted an Initial Public Offering (IPO) in 1993. After the IPO of PT Fast, many F&B companies who conducted an IPO are the one whose business involved packaged food. However, recently, one of the F&B players in Indonesia, “Fore,” which specializes in the beverage sector (mainly coffee), successfully conducted an IPO.
Another notable success story comes from F&B company, originating from a previously family-owned business. Djarum group, a conglomerate company in Indonesia, has successfully acquired the business of “Bakmi GM” for an approximate valution of USD 126 to USD 151 million. Bakmi GM, established in 1959 by a married couple, has since grown into a prominent noodle restraurant chain in Indonesia before it being acquired by the Djarum group.
Private equity and investing firms have also increased their interest in investing in the F&B sectors. East Ventures Growth Fund (EVG), a prominent investment firm in Indonesia, has invested in Ismaya Group (a major F&B players in Indonesia) for a valuation of USD 18.1 million. Trihill Capital and East Ventures (EV) also expands its F&B portofolio by investing in UENA (a hyperlocal online F&B startup based in Indonesia). Another investing firm, Insignia Ventures Partners also made an investment recently in Se’Indonesia.
These examples demonstrate the significant potential of F&B businesses in Indonesia if they are managed effectively.
Conclusion
Indonesia’s F&B sector offers compelling investment opportunities driven by its large consumer base and diverse business models. Yet these prospects are accompanied by a complex regulatory landscape that requires careful navigation—from the distinctions between franchise and licensing structures, to KBLI classifications, risk-based licensing under GR 28/2025, and increasingly stringent halal certification obligations. Operators must also address operational risks, including intense market competition, manpower challenges, supply chain vulnerabilities, and uncertainties inherent in franchise or licensing arrangements.
With thorough regulatory compliance, prudent risk management, and strategic planning, the F&B industry remains a viable and attractive investment destination in Indonesia
In conclusion, achieving success in this market necessitates a strategic amalgamation of culinary innovation, astute business acumen, and unwavering compliance with a comprehensive legal framework.
For further information, please contact:
MetaLAW, Legal & Tax Consultant, Jakarta, Indonesia
general@metalaw.id
