Is Franchise regulated in Indonesia?
In September 2019, the Indonesian Minister of Trade introduced new regulations to make franchising in Indonesia easier. Franchising is now governed by MOT Regulation 71/2019, which revoked all prior franchise regulations.
What is the registration process to have the franchise registered?
Franchises must hold a Surat Tanda Pendaftaran Waralaba (Franchise Registration Certificate), which can be applied for through the country’s Online Single Submission (OSS) system. In order to obtain an STPW, businesses must supply a Franchise Agreement and a Franchise Offering Prospectus during the application process. Once a certificate is issued, it will remain valid until either the Franchise Agreement expires, or the business activities cease. The certificate will also become invalid if the Intellectual Property rights expire or registration for such is rejected.
- Fines and sanctions may be imposed on anyone operating a franchise business that does not hold an STPW. Franchisees have the right to accuse the franchisor of fraud and take action under criminal law, if the franchise agreement and the prospectus are not registered under the STPW.
What is the estimated timeline?
Under the old system, assuming all supporting documents are correctly executed, the approximate issue time for a certificate to be released by the Ministry of Trade is within 14 working days.
As of 1 January 2017, with the country’s new OSS system, the estimated time for the Ministry to process STPW applications is only 2 days.
What are the criteria for a company to be allowed to franchise in the country?
In Indonesia, a franchise must fulfil the following requirements:
- Has the characteristics of a business;
- Has registered Intellectual Property rights;
- Is profitable, with at least 5 years of experience in the business;
- Is easy to learn or apply;
- Has continuous support from the franchisor; and
- Has a written standard operating procedure outlining the quality of the goods or services being sold.
The above-mentioned requirements are according to Article 2 verse (2) and (3) of MOT Regulation 71/2019.
What tips can we provide to Franchisors or Franchisees?
- It is important to note that all Franchise Agreements are governed by Indonesian law and must be written in Indonesian (Bahasa Indonesia). Foreign Prospectus of Franchise Offers must be translated into Bahasa Indonesia by a Sworn Translator, and must be notarized by a public notary together with legalized statement issued by local Indonesian consulate general.
Franchise businesses are also obligated to prioritise local goods and services when executing their business. Fortunately, the regulations no longer stipulate an exact percentage for this matter (previously 80% of local content was required).
Examples of popular Indonesian franchises:
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