December 22, 2022
Rules for franchising in Indonesia were first published in 1997 through a government regulation and a ministerial decree, which was subsequently amended several times. The franchising regulations currently in effect are Government Regulation No. 42 of 2007 concerning Franchises and Regulation issued by the Minister of Trade No. 71 of 2019 concerning the Implementation of Franchising (MOT No. 71 of 2019). Franchises in Indonesia must meet certain criteria that distinguish them from other types of businesses, and franchising must be based on a franchise agreement governed by Indonesian law. Prior to entering into a franchise agreement, a franchisor must provide a prospectus (disclosure document) to the prospective franchisee at least two weeks before the execution of the franchise agreement so that the prospective franchisee has sufficient time to review the reputation and goodwill of the franchisor through the prospectus. The prospectus must contain various details about the franchise business, its management, its operations, and other relevant aspects. Both local and foreign franchisors must obtain a franchise registration certificate—referred to as an STPW—from the Ministry of Trade before offering their franchises to prospective franchisees. The franchisee is also required to obtain an STPW. The STPW for the franchisor is the proof of prospectus registration, while the STPW for the franchisee is the proof of registration of the franchise agreement. Franchisors and franchisees who have STPWs are required to submit reports on franchise business activities to the Ministry of Trade’s director of business development and distribution by the end of June each year. Up to three written warnings will be served on a franchisor or franchisee who does not comply with the registration requirements. A fine of up to IDR 100 million (approx. USD 6,400) will be imposed if the franchisor or franchisee fails to respond to the warnings. MOT No.