International franchisors are increasing looking at
Indonesia as an attractive market in which to establish their
brand. The MOIT are finalising new draft legislation which is
likely to impact the structure of franchise
Indonesian law currently
contains specific franchise regulations and technical guidelines
which require franchisors to: (i) issue a detailed translated
disclosure document to their franchisees; and (ii) register
themselves as a franchisor, prior to signing the franchise
agreement. These regulations apply to any commercial relationship,
which exhibits the typical characteristics of a franchise. Changing
the name of the legal document to a "distribution agreement" or
attempting to label the relationship as a retail or distribution
arrangement will not circumvent these regulations.
The disclosure and
registration regime has been in place for a number of years and is
administered by the Ministry of Trade and Industry (MOIT).
The MOIT is currently in the
process of finalising a new draft regulation which, if passed, is
likely to impact upon the structure of franchise deals. The key
points currently under discussion within the MOIT include the
- a limitation on the number of outlets that a franchisee may
- a requirement for franchisees to appoint sub franchisees should
this limitation be exceeded.