Opening a restaurant in Bali during the pandemic might not be as crazy as it sounds
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Opening a restaurant in Bali during the pandemic might not sound like the most obvious business opportunity. The international borders have been (semi)closed for the past two years. Lack of international tourism means that most businesses relying on foreign tourists are struggling.
However, the crisis also creates opportunities for new players. Market shares get redistributed.
What about the food and beverage industry? Is opening a restaurant in Bali in 2022 too early or is now the time to grab the opportunity?
In Emerhub’s exclusive interviews, restaurateurs who opened their restaurants in Bali during the pandemic shared with us how launching their F&B business recently has given them certain advantages and what business opportunities in Bali are there at present times.
“Your restaurant’s concept is everything,” said Jorge Nunes, when asked about his top tips in opening a restaurant in Bali, especially during the pandemic. Nunes just recently launched MAR, a seafood restaurant and poolside lounge at the heart of Berawa, Canggu, serving fresh, locally-sourced coastal Portuguese cuisine.
According to Nunes, restaurants with curated items on offer tend to fare better than those relying on a broad menu. “The customers now come with more specific preferences, so restaurants having rice, burgers, and pizzas on the menu don’t tend to survive in the pandemic because they don’t have unique selling points.”
Can local customers replace international tourism in Bali?
Ben Karmadi, the owner of Shotgun Social, a brewhouse in Sanur known for serving uniquely curated draft beers, shared the same observation. “One of our main markets now is non-international tourists. There’s a preference towards ‘world’s popular food.’ Once it’s heard in Jakarta, hyped in Bali, people will come all the way.”
However, he cautioned on building the concept around the hype, “When it comes to opportunity during the pandemic, people say to focus on the local market, but still, it’s a tough market. Don’t rely too much on the hype; there’s no longevity around such things,” Karmadi’s Shotgun Social first opened its door in July 2020 and remains a favorite amongst ex-pats and locals.
The pandemic has been tough for most restaurants in Bali but there are some benefits. For example, the lower overhead costs are lower and it’s easier to stand out with a new concept due than it was before the pandemic. That is certainly the case for MAR’s owner Jorge Nunes, who identified a business opportunity right off the bat.
“The pandemic allows us to afford this villa where MAR is located now. It was abandoned as the owner couldn’t rent it because of the COVID crisis,” explained Nunes. “We made a deal with the owner, who agreed to lend the space to us in return for profit sharing.”
Nunes highlighted that since 2020, there had been a significant 25% drop in the number of tourism accommodations still operating in Bali. The absence of international tourists has left many beautiful hotels, guest houses, and vacation villas vacant; restaurateurs looking to find the next venues for their ventures are often spoiled with choices.
He added, “We renovated the building, but this was also great from a business point of view as the labor and the material costs here are cheaper than in Europe, Australia, and the US.”
As Bali's airport did not accept international flights, the number of foreign tourists in Bali was officially recorded as just 51.
Foreigners opening a restaurant in Bali during the pandemic also found that business tends to thrive when they can adapt to customers’ newly found habits. Nunes told Emerhub, “One thing that took off after the pandemic is takeaways and food delivery apps. They are here to stay, and people will keep relying on that.”
Data from GoFood, a favorite food delivery app in Indonesia, shows a 43% jump in the number of food and beverage businesses on the platform compared to 2019. According to the survey conducted by the app, by accommodating takeaways and deliveries during the pandemic, many businesses have reported a sevenfold increase in profits.
Hover over the area to see the changes in the total number of restaurants per each municipality of Bali
Changes to the popular areas in Bali
Finding the right areas when opening a restaurant in Bali is crucial. Shotgun Social’s Ben Karmadi emphasizes that not all places are made equal during the pandemic. Some areas in Bali remain more popular than others.
“Businesses that are set up in nearby residential areas have the potential to thrive during the pandemic. Meanwhile, other areas that used to rely heavily on tourism tend to struggle,” said Karmadi.
“Take, for example, the Kuta area. Before the pandemic, the place used to be packed during weekends because of the tourist influx. Now, it’s relatively empty compared to other family-friendly, residential areas in Bali such as Canggu, Berawa, Umalas, Sanur, or even Denpasar.”
Foreigners have been allowed to fully own restaurants in Bali since 2016.
Shotgun Social’s Ben Karmadi advised any foreigner looking into opening a new restaurant in Bali to understand the risks and benefits and establish themselves using the proper channel.
“Make sure to find a passionate partner that can do the right thing for you, and invest in that. You should also have six months' worth of cash flow when you open during the pandemic,” said Karmadi.
“If you want to open a new restaurant in Bali, it is also important to get the right concept and find the right consultant. This is crucial,” he concluded.
Once you’re all set to enter the market and open a restaurant in Bali, it is time to handle the legalities. It starts with property leasing for the restaurant, incorporation, and getting licenses to open the restaurant in Bali.
Leasing a property for the restaurant
Finding a property and leasing it should be your first task to prepare the legal documents. Since a commercial address is one of the requirements for incorporation in Indonesia.
You can try finding commercial properties in Bali’s best areas for restaurants. You will need a space that can hold more than 50 seating capacity for your restaurant.
Keep in mind the property has to be in the proper zoning with a building permit (IMB) for a restaurant. Leasing without IMB makes you an illegal tenant and forces you to pay the retroactive tax.
Using an unsuitable permit for a residential home or different business activity will get you a warning letter, fines, or shutdown. Afterward, you will have to lease another property and re-incorporate with the correct IMB.
Establishing a foreign-owned company (PT PMA)
Once your commercial address is ready, you will need to create a foreign-owned company (PT PMA). This type of limited liability company allows you to generate revenue in Indonesia. It also lets you open and maintain 100% ownership of your restaurant business in Bali.
Its smallest required corporate structure has two individual shareholders. Each serves the roles of the director and the commissioner. The shareholders will have to sign a capital statement letter guaranteeing the fulfillment of the required paid-up capital.
As soon as your company is established and your company bank account is opened, you will need to inject the paid-up capital into the account. The required minimum paid-up capital of PT PMA is currently IDR 10 billion.
However, considering the high minimum paid-up capital in Indonesia. You can use a special-purpose vehicle (SPV) as a safe alternative to register your business. Plus, an SPV is beneficial if you want a smaller scale of F&B business of less than 50 seating with fewer licenses.
Obtaining restaurant licenses in Bali
The restaurant business correlates with Bali’s tourism. Thus, you will need to get a Tourism Business License (TDUP) to open your restaurant in Bali. Its valid duration depends on the location of your restaurant. Usually, TDUP is valid for five years and is subject to renewal.
To get the TDUP, you will need to prepare the additional legal documents:
- Company tax card (NPWP)
- Disturbance permit (Hinder Ordonantie)
- Environmental impact analysis (AMDAL)
- Health and hygiene certificate (SLS)
- 4R-size colored pictures of the restaurant location
Furthermore, you will need to apply for intellectual property (HKI) licenses to play music via multimedia and hold live music. Suppose your restaurant will sell alcoholic beverages. You will also need to have an alcoholic beverage trading license (SIUP-MB).
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