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Web address: http://www.ffw.com/practices/intellectual-property/franchising/international-franchising/franchising-in-indonesia.aspx

Practices

Franchising in Indonesia

Economy

Indonesia has the world's 18th largest economy based on GDP figures. Indonesia reported substantially higher growth figures during the recession than its G20 counterparts.

Legislation

Law No. 42 of 2007 dated 23 July 2007 on Franchising (Regulation No. 42), its implementing regulation, Regulation of the Minister of Trade No. 31/M-DAG/PER/8/2008 dated 21 August 2008 on Implementation of Franchising (Regulation No. 31), and Decree of the Director General of Domestic Trade No. 138/PDN/KEP/10/2008 dated 31 October 2008 on the Technical Guidelines for the Implementation of Franchising (Decree No. 138), all impact upon and regulate franchising in Indonesia.

Franchise Market

The Indonesian franchise industry has grown considerably in the last forty (40) years. The Indonesian franchise market is dominated mostly by American franchises however, there are a large number of local franchise businesses.

The most popular and quickly growing franchise sectors are food and beverages, education concepts, retail and business services.

Franchise Legislation
  • Prior to selling a franchise in Indonesia the franchisor must have successfully been in business for five (5) years; the business must still be in operation and must still be profitable.
  • The franchisor must register information relating to the franchise agreement; the franchisor's current business affairs, proposed technical assistance and proof of the identity of the franchisor, with the Ministry of Industry and Trade (MOIT).
  • A successful registration of the franchise agreement with the MOIT will result in the issuance of a Franchise Business Registration Certificate. (The registration must be within thirty (30) days, starting from the effective date of the franchise agreement; failure to comply could result in revocation of the Franchise Business Registration Certificate).
  • A franchisor must provide a prospectus disclosing its business data and relevant information to the franchisee at least two (2) weeks before the execution of the franchise agreement.
Conclusion

There are stringent regulations governing franchising law and agreements, in light of this, prospective franchisors considering entering the Indonesian franchise market should seek specialist legal advice to ensure effective compliance and enforceability of their agreements.