Franchising is one of the fastest developing business in Indonesia, this is caused the nature of franchising which are less of risks and easy to be started. In franchising, people have a shortcut to build a business, for example, they do not need to think about product branding, managing system, or finding innovation in their business, because all mentioned works will be done by the franchisor. Further, Indonesia as one of the most emerging market in the world also has its own attractiveness for investors to come and start their franchise business in Indonesia.
Franchise business is regulated under Ministry of Trade Regulation Number 53/M-DAG/PER/8/2012 as amended by Ministry of Trade Regulation Number 57/M-DAG/PER/9/2014 concerning Implementation of Franchising (“Franchise Regulation”). Based on Franchise Regulation, both Franchisor and Franchisee should obtain the Certificate of Franchise Registration (Surat Tanda Pendaftaran Waralaba “STPW”) as fundamental documents for running Franchise Business in Indonesia.
Franchise Registration Procedures
To obtain the STPW, the applicant should submit the following documents to the MoT, as follows:
A. Master Franchise Agreement
Every Franchise should be based on the Franchise Agreement, this document is a primary document for the Ministry of Trade (“MoT”) to issue the STPW. Because of the importance of this document, it is submitted first before other requirements. The MoT will review the Franchise Agreement within 20 (twenty) working days to ensure it does not violate Indonesian laws and regulations. If it is found to be in violation, the franchisor cannot register its franchise prospectus.
If the Franchise Agreement is in accordance with the regulation, then the others requirement can be submitted.
B. Franchise Prospectus
Franchise Prospectus is a written documents made by Franchisor for the Franchise which contains detailed information about franchise business, for instance: identity, legality, history, list of franchise, financial schemes, etc.
NOTE: Franchise Prospectus and Master Franchise Agreement which are written in languages other than Indonesian must be officially translated into Indonesian.
The Franchise Regulation requires 80% of raw goods/raw material used by the franchisee to be locally made. Discretion is available as long as approved by the MoT.
C. Business Licenses
Please be informed that franchise is just a system of business, the business itself must be in accordance with the field of business that is operated. Therefore, every business must have technical license granted to it, for instance if the operating business is restaurant, then the Franchisee should have the Tourism Registration Certificate and if there is a foreign involvement on that business, then the shares composition must comply with the Negative Investment List issued by the Indonesian Coordinating Board (“BKPM”).
Moreover, before issuing the STPW, the MoT sometimes requires a presentation to make sure the proposed Franchise Business activities. Further, based on Franchise Regulation, STPW will be issued in 2 (two) working days since the application is complete and accepted by the MoT.
HOW CAN SMART LEGAL CONSULTING HELP YOU?
SMART Legal Consulting has extensive experience in helping investors register their Franchise business in Indonesia.If you need immediate assistance, please contact the SMART Help Desk at: