What is Franchise ?
The main regulation on franchise matters is the Minister of Trade Regulation No.53/2012 on Implementation of Franchise (“Permendag No.53/2012”)
Article 1 of Permendag No.53/2012, defines “franchise” as:
“A special right owned by an individual or a business entity to a business system with a business characteristic in order to market goods and/or services that have been proven successful and can be utilized and/or used by other parties under a Franchise Agreement”.
Criteria of Franchise
Franchise must meet the following criteria:
- Possesses a business characteristic
- Proven profitable
- Have standards for goods and/or services offered in a written form
- Easy to teach and applicable
- Offers continuous support
- Owns registered Intellectual Property
Mechanism of Franchise Implementation
Franchisor shall convey franchise prospectus to franchisee at least 2 (two) weeks before signing a Franchise Agreement.
Franchise prospectus shall contain:
- Identity of franchisor
- Legal business status
- Business history of franchisor (information regarding the establishment of business entity, business activities and business development, standard of production system, services, sales, and written franchise business management)
- Organizational structure of franchisor
- Financial statement for the past 2 (two) years
- Number of franchise businesses
- List of franchisees
- Rights and obligations of franchisor
If a franchise prospectus is from foreign franchisor, it shall be legalized by Public Notary by attaching a statement letter from the Indonesian Embassy at the country of origin.
Franchise implementation shall be based on a Franchise Agreement which contains at least the following:
- Names and addresses of the parties
- Types of Intellectual Property Rights
- Business activities
- Rights and duties of the parties
- Assistance, facilities, operational training, and marketing guidance provided by franchisor to the franchisee
- Business areas
- Term of agreement
- Honorarium/royalty payment method
- Ownership, change of ownership, and the rights of heirs
- Dispute resolution
- Procedures for the renewal, expiration, and termination of agreement
- Warranty from the franchisor to perform its obligations to the franchisee under the agreement until the term of the agreement has ended
- Number of outlets that will be managed by the franchisee
Franchisor and franchisee shall have Franchise Registration Certificate (STPW). Requirements to obtain STPW:
- Copy of franchisor/franchisee ID
- Copy of Deed of Establishment
- Copy of prospectus of franchise business
- Copy of the Franchise Agreement
- Copy of Business Permit
- Copy of Intellectual Property Rights Application
- Employment composition
- Composition of goods/ raw material used
Disclaimer:
The information contained in this brochure is general information and should not be considered as a legal advice or any professional advice. Please consult with professional advisors for advice concerning this specific matters before making any decisions.
