You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

September 26, 2024

Indonesia Issues New Franchise Regulation

Subscribe to Updates

Indonesia enacted a new franchise regulation, Government Regulation No. 35 of 2024 on Franchising (“GR 35/2024”), on September 2, 2024.

Franchising in Indonesia was previously governed by Government Regulation No. 42 of 2007 on Franchising (“GR 42/2007”), along with an implementing regulation, Ministry of Trade Regulation No. 71 of 2019 regarding Implementation of Franchising (“MOT Regulation 71/2019”).

This new regulation repeals GR 42/2007. However, MOT Regulation No. 71/2019 remains in effect until a new MOT regulation can be enacted.

The new franchise regulation contains several amendments and provides more detailed requirements to complement MOT Regulation No. 71/2019.

Comparison of GR 35/2024 to GR 42/2007

  • Minimum years of business operation. The new regulation reduces the minimum duration that a franchise registration applicant must have been operating from five years to three years.
  • Intellectual property (IP) status. Any relevant IP must now be registered before a franchise registration application can be submitted. This is a change from the previous regulations, under which it was possible to obtain a franchise registration (STPW) while an IP application was still pending, and if the IP application could not be registered, the STPW would be canceled.
  • Registration requirements for foreign franchisors. Under the new regulation, foreign franchisors must provide a legalized or apostilled business permit document from the country of origin in addition to the previously required franchise offering prospectus and statement letter from the relevant Indonesian authority.
  • Administrative sanctions. The new regulation has adjusted the three escalating stages of administrative sanctions to (1) two warning letters, (2) a 14-day suspension from business activities, and (3) STPW revocation. This varies from the three stages under the previous regulation (three warning letters, fine, and STPW revocation). The new regulation also expands the list of noncompliant actions that are subject to these administrative sanctions. In addition to the regulatory obligations detailed in the previous regulation, failure to use the proper franchise logo and failure to submit activity reports are now also punishable by these administrative sanctions.
  • Types of franchise organizers. The new regulation expands the categories of franchise organizers (i.e., the main parties to a franchise business arrangement) from two (franchisor and franchisee) to eight, including subfranchisors and subfranchisees for both foreign and local franchises.
  • Franchise registration (STPW) validity. The new regulation specifies conditions for STPW invalidity (e.g., termination of agreement, business cessation, IP expiration), and there is no longer a need to renew the STPW every five years. Under the previous regulation, STPW validity was limited to five years (renewable).

Notwithstanding these changes and updates, the core structure of Indonesia’s franchise regulations remains similar. In addition, many of the new provisions in GR 35/2024 had already been adopted in the aforementioned MOT Regulation 71/2019.

Implications

GR 35/2024 streamlines some processes (e.g., no longer requiring STPW renewal every five years) and tightens some requirements (e.g., regarding IP registration). It also provides more detailed categorization of franchise organizers and clearer sanction procedures, potentially aiming for a more structured and comprehensive regulatory framework.

These changes are designed to enhance the regulatory framework, ensuring a more compliant and robust franchise industry. This new regulation reflects the government’s commitment to fostering the growth of franchises, which continue to make significant contributions to the Indonesian economy.

For more details on GR 35/2024, or on any aspect of franchising in Indonesia, please contact Tilleke & Gibbins at [email protected].

Related Professionals

Industries

Consumer Products

Practices

Intellectual Property

Location

RELATED INSIGHTS​ 

September 15, 2022
In the course of our work, we often hear about consumers in Thailand lodging complaints with the Office of the Consumer Protection Board (OCPB) about problems with a purchased product or service. The OCPB is a government agency attached to the Office of the Prime Minister. Its main duties are to protect consumers in Thailand with respect to product advertising, product labeling, and contracts, and to handle consumer complaints. However, there are exceptions to the types of consumer complaints that the OCPB can handle. This is because some consumer complaints must by law be handled by certain specialized agencies. Examples of these exceptions include consumer complaints relating to: health products (food, drugs, cosmetics, medical devices, household dangerous substances, and narcotics); medical services; insurance; pricing of consumer products; condominium juristic person; public land; rail, water, and air transportation; tourism; education; banking and finance; telecommunications; and electricity and water consumption. Procedure When a consumer complaint that the office can accept comes to the OCPB, the officers first consider whether the business operator has violated any laws, in which case the relevant authorities, such as the police, should handle the matter. When the officers consider it appropriate, they may ask the parties to mediate the dispute. Complaints in Bangkok are mediated by officers at the Bangkok OCPB. For complaints lodged in other provinces, the governors of the provinces may assign officers or agencies under their supervision to mediate. The OCPB can mediate twice within 90 days. If the parties still want to continue with the mediation, a subcommittee of the Consumer Protection Board (CPB)—the body that directs the OCPB—will then conduct two more mediation sessions within 90 days. If a resolution is still not reached, the subcommittee can conduct one additional mediation session before declaring the mediation failed and ending the complaint
Read More
January 12, 2022
The popularity of the franchise business model has grown rapidly in mainland Southeast Asia in recent years, with some of the world’s top brands becoming common sights in the commercial districts and shopping malls of major regional cities in Cambodia, Laos, Myanmar, Thailand, and Vietnam. Although these countries have not yet enacted franchising-specific laws, certain features of each country’s regulatory regime impact franchising. As such, well-prepared franchise business operations have comfortably adapted to each country’s regulatory framework, and the growth is poised to continue even as the global retail sector redesigns and redoubles its efforts in the wake of the COVID-19 pandemic. In fact, the franchise business model, which is both global and local at the same time, may offer retail entrepreneurs a solution in their quest to meet the challenges of the new retail economic realities. This article explains the legal frameworks that impact the franchise business model in Cambodia, Laos, Myanmar, Thailand, and Vietnam. For each country, this article discusses relevant regulatory considerations for franchise agreements, how to protect intellectual property rights, and judicial and arbitral procedures for resolving disputes that might arise between a franchisor and a franchisee. The full article can be downloaded through the button below.   © 2021. Originally published in the Franchise Law Journal, Vol. 41, No. 2, Fall 2021, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
Read More
December 31, 2021
In the last week of December, 2021, the Ministry of Justice published the Law Amending Certain Provisions of the Laws on Tax No. 01/NA, dated August 7, 2021, in the Government Gazette. The Law will come into force on January 1, 2022. The most notable amendments relate to Value Added Tax (VAT), which are summarized below. The new law also makes changes to the laws on tax management, income tax, and excise tax, which Tilleke & Gibbins will provide updates on in due course.
Read More
November 24, 2021
Attorneys from Tilleke & Gibbins have provided the latest update to the Thailand contribution to Doing Business in…, a Q&A-style guide published by Thomson Reuters Practical Law that presents an overview of the legal framework for doing business in 63 jurisdictions worldwide. The Thailand chapter of the guide outlines Thailand’s legal system and key laws applicable to foreign companies doing business in the country. The chapter specifically covers the following main topics: Legal system: Thailand’s court system and codified legal system. Foreign investment: Lists of reserved business activities, restrictions on doing business with certain jurisdictions, exchange controls and currency regulations, and grants and incentives available to investors. Business vehicles: Ordinary partnerships, registered ordinary partnerships, limited partnerships, private limited companies, and public companies. Environment: Main laws and regulations, factory operation. Employment: Laws, employment contract requirements, work permits, and termination and redundancy. Tax: Taxes on employment, tax and nontax resident employees and businesses, corporate income tax, value added tax, special business tax, municipal tax, stamp duty, dividends, interest, intellectual property royalties. Competition: Important aspects of Thailand’s regulatory regime surrounding competition, centered around the updated Trade Competition Act. Antibribery and corruption: Laws, compliance requirements, regulatory authority. Intellectual property: Patents, trademarks, registered and unregistered designs, and copyright. Marketing agreements and advertising: Regulation of marketing agreements, Thailand’s Consumer Protection Act, direct marketing, role of the Consumer Protection Board and Food and Drug Administration. E-commerce: E-commerce laws and regulations, marketing and sales via online platforms. Data protection: An outline of Thailand’s Personal Data Protection Act. Product liability: Procedures and regulations for product liability and product safety, including the Unsafe Goods Liability Act and the Consumer Case Procedure Act. Product liability: Key regulatory authorities for trade competition, environmental issues, and financial services. To browse, download, or print the Thailand chapter, please visit the Practical Law website.
Read More