Oct

12

Franchising Your Business in Indonesia

Domestic and international franchise businesses have expanded rapidly as a way of investing in Indonesia. In this country, it is nearly impossible for you to go outside without seeing a franchise business, be it in F&B (McDonald’s, KFC, Starbucks Coffee), retail (Alfamart, Indomart), or beauty and personal care (Haircode, Kaizen).

However, the regulatory system around franchising is extensive and complex, which poses a challenge for business actors who want to grow through this route.

The following are some of the regulations regarding franchising in Indonesia:

  1. Government Regulation No. 42 Year 2007 on Franchising;
  2. Minister of Trade Regulation No. 53/M-DAG/PER/8/2012 Year 2012 on the Implementation of Franchises as amended by the Minister of Trade Regulation No. 57/M-DAG/PER/9/2014;
  3. Minister of Trade Regulation No. 68/M-DAG/PER/10/2012 Year 2012 on Franchising for Modern Store;
  4. Minister of Trade Regulation No. 58/M-DAG/PER/9/2014 Year 2014 on Partnership Development in Franchising for Food and Beverage Services

According to Indonesian law, franchising is defined as a special right owned by an individual or entity (the franchisor) over the unique characters of a business system which has been successful in promoting goods and/or services and (under a written franchise agreement) can be used by another party (the franchisee). 1

As part of the franchise agreement, franchisors are required to support the franchisee in developing the business. This may be through education and training for the franchisee and its staff members, supervision of operations for a certain period of time, or business or product development support.

Upon entering into a franchise agreement, the franchisor must also provide the franchisee with a franchise-offering prospectus. Such prospectus must include details on the business and the franchising parties, a history of business activities, financial statements, lists of franchisees, and the rights and obligations of the franchisor and the franchisee. 2

Moreover, franchisors must first submit a draft franchise agreement to the Ministry of Trade, to confirm that the agreement does not violate any local laws or regulations. Once it is approved, the franchisor may proceed to file an application and register their franchise-offering prospectus (in Indonesian) with the Ministry of Trade to obtain the franchise registration certificate (Surat Tanda Pendaftaran Waralaba).3

Other than a promising business model, the legal structure of franchise business can be an option for foreign investor planning to invest in Indonesia if their business restricted for foreign investment. The foreign investor may still run the restricted business by collaborating with local partners and entering into franchise agreements.

It should be noted that there are sanctions for both franchisors and franchisees in the event that they fail to comply with certain requirements. Such sanctions can be in the form of written warning, fines, and/or revocation of the franchise’s certificate of registration. 4

Therefore, it is important to have sound legal advice and representation when entering a franchise agreement, or in dispute situations related to franchised business. At Schinder Law Firm, we have the expertise and experience in assisting clients in establishing franchise businesses and have represented them in disputes. We have advised on business plans, reviewed prospectus documents, drafted franchise contracts, assisted in acquiring Franchise Registration Certificates, as well as represented franchisors and franchisees in franchise disputes.

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1Article 1 (1) Government Regulation No: 42/2007.
2Somboon Earterasarun & Wulan Purnamasari, “Franchise Agreement Registration in Indonesia”, 2015.
3Article 12 (4) Government Regulation No: 42/2007.
4Article 16 (2) Government Regulation No: 42/2007.

About the author:

 

MORALES SHAROZ SUNDUSINGMorales Sharoz Sundusing
Morales is a qualified Indonesian advocate. He specialises in litigation and other contentious matters. He has extensive experience in handling high profile corruption cases as well as general election disputes, i.e. 2014 Presidential Election, before the Indonesian Constitutional Court.

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Dear valued Visitor,

Data is a valuable currency in this new world. In the midst of digital transformation, the Indonesian government has taken the final decision to pass the Pelindungan Data Pribadi (PDP) Bill by September 2022. The PDP Law applies to all businesses established in Indonesia and puts the consumer in control. The task of complying with this regulation falls upon businesses.

The PDP Law affects a variety of business operations, including how your sales team prospect and how marketing initiatives are managed. Businesses have had to reassess their business procedures, applications, and forms. Additionally, all businesses that work with personal data should designate a Data Protection Officer (DPO) or data controller to oversee PDP compliance.

In line with this spirit, it gives us great pleasure to announce and share with all our esteemed clients and business associates that Schinder Law Firm is prepared to assist your company to understand the impacts of the Personal Data Protection Law (PDPL) and take the required measures to comply with the law. Our Privacy, Data Protection, and Cybersecurity practice group is a pioneer in providing data privacy law services in Indonesia. Personal data protection services include but are not limited to:

  • Assessing the existing systems, processes, and controls, etc.
  • Providing provide gap assessment on the existing systems, processes, and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDP Law
  • Developing policies, best practices, and procedures
  • Advising on the security of personal data and managing data breaches
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role, and responsibilities of a data protection officer
  • Advising on cross-border transfers of personal data
  • Carrying out data protection impact assessments and data protection audits
  • Recommending other necessary corrective actions in order to comply with the PDP Law
  • Training on the PDP Law tailored to clients’ businesses

We look forward to many more opportunities in the year ahead with your continued support and trust. For consultation, please send us a WhatsApp or Email.

Warmest regards,
Naz Schinder
Managing Partner

Keep Up with the New Law in Indonesia: Personal Data Protection

  • Assessing the existing systems, processes and controls, etc.
  • Providing provide gap assessment on the existing systems, processes and controls, etc.
  • Developing and ensuring contracts and agreements comply with the PDPL.
  • Developing policies, best practices and procedures.
  • Advising on security of personal data and managing data breaches.
  • Acting as the Data Protection Officer (DPO) and advising upon the appointment, role and responsibilities of a data protection officer.
  • Advising on cross-border transfers of personal data.
  • Carrying out data protection impact assessments and data protection audits.
  • Recommending other necessary corrective actions in order to comply with the PDPL.
  • Training on the PDPL tailored to clients’ businesses.
Privacy, Data Protection and Cyber Security
We help our clients to understand the impact of the Personal Data Protection Law (PDPL) on their companies and take the required measures to comply with the law.