Master Franchise Agreement: New Requirements for Organizing Franchise Business

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Master Franchise Agreement: New Requirements for Organizing Franchise Business

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The Minister of Trade Regulation No. 53/M-DAG/PER/8/2012 on Organizing Franchise Business (“Regulation”) has been amended by The Minister of Trade Regulation No. 57/M-DAG/PER/9/2014 (“Amendment”) which was issued on 17 September 2014. The issuance of the Amendment is to provide a certainty and regularity in organizing franchise business.

The Amendment changes the procedure to acquire a Proof of Franchise Registration (Surat Tanda Pendaftaran Waralaba). It should be noted that in accordance with the Article 9 of the Regulation, a franchisor must has a Proof of Franchise Registration. To acquire the Proof of Franchise Registration, foreign franchisor, domestic franchisor, foreign sub-franchisor, and domestic sub-franchisor must register the Franchise Prospectus to the Directorate of Trade Business Guidance within the Ministry of Trade by filling out a form as listed in Appendix III A-1 of the Regulation.

Pursuant to Article 10 of the Regulation, the franchisee is also obligated to acquire a Proof of Franchise Registration. To acquire the Proof of Franchise Registration, a franchisee of foreign franchise must register the franchise agreement to the Directorate of Trade Business Guidance within the Ministry of Trade by filling out a form as listed in Appendix III B-1 of the Regulation. In addition, a franchisee of foreign franchise, a sub-franchisee of foreign franchise, and a sub-franchisee of domestic franchise are obligated to register the franchise agreement to the Service Office that is in charge of Trade in Jakarta Province or Regency/City or the local One Stop Integrated Services Office in Indonesia by filling out a form as listed in Appendix III B-2 of the Regulation.

As stipulated in Article 11 of the Regulation, the application for a Proof of Franchise Registration must be signed by the owner, manager, or the person in charge of the company by attaching the required documents for the Proof of Franchise Registration Application. Related with these supporting documents the Amendment introduces an additional requirement. Pursuant to Article I of the Amendment, the franchisor candidate must submit an application for the Proof of Franchise Registration by delivering a Master Franchise Agreement as listed in Appendix IV letter A of the Amendment.

Further stipulated in Article I of the Amendment, an official who issues the Proof of Franchise Registration examine the Master Franchise Agreement within 20 business days. In case of the Master Franchise Agreement assessed does not violate any provision of the Laws and Regulations, the franchisor candidate may proceed the Proof of Franchise Registration Application by completing the required documents for the Proof of Franchise Registration Application as listed in Appendix IV of the Amendment. However, if the Master Franchise Agreement assessed is violating a provision of the Laws and Regulations, then the Proof of Franchise Registration Application will be rejected.

HOW CAN SMART LEGAL CONSULTING HELP YOU?

SMART Legal Consulting has extensive experience in helping to organizing Franchise Business, and to maintain such permits to be updated so that they do not lose their validity.

If you need immediate assistance, please contact SMART Help Desk at:

E:  info@smartcolaw.com

H: +62821-1234-1235

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Fairus Harris Senior Associate
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