In accordance with the laws of Indonesia, a franchise is a special right that is owned by a legal entity or an individual. The franchise business in Indonesia is a unique system that has shown effectiveness in promoting products and services. Individuals and legal entities can utilise this type of business model based on a franchise agreement.
A Franchise Agreement for a Franchise Business in Indonesia
To start a franchise business in Indonesia, a franchisor must have a franchise agreement drafted and delivered to the franchisee at least two weeks before executing the contract.
If your franchise agreement is in English, it must be translated into the Indonesian language and certified so that it can be considered to be legal and effective.
Both franchisor and franchisee involved in the franchise agreement shall comply with all Indonesian laws and regulations concerning health, consumer protection, environment, education, spatial layout, intellectual property, and employment.
Information Covered in Franchise Agreement in Indonesia
The franchise agreement for your franchise business in Indonesia should comprise at least these items: business activities, business areas, both parties’ names and addresses, both parties’ rights and duties, types of intellectual property rights, agreement term, facilities, assistance, marketing guidance, and operational from the franchisor to the franchisee, remuneration payment, dispute resolution, ownership, rights of heirs, and change of ownership, procedures for agreement termination, renewal, and expiration (one-sided termination of a franchise agreement is not permitted before the agreement is expired), and franchisee’s number of outlets.
Here are some of the frequently asked questions by foreign investors that you may find helpful if you are considering entering the franchise market:
1. What is the information that a franchisor has to provide in the pre-agreement disclosure document?
The minimum requirements for a franchisor to provide their disclosure information are as follows:
- The franchisor’s proof of identity
- The franchise business’ legal documents
- The franchisor’s business history
- The franchisor’s organizational structure
- The number of franchise businesses
- Audited financial statements and balance sheets for the previous two years
- The list of franchisees
- The franchisor and the franchisee’s rights and obligations
2. What regulatory authority is responsible to enforce the franchising laws, requirements, and franchise agreements in Indonesia?
The regulatory authority governing franchising laws and requirements is the Ministry of Trade in Indonesia.
3. Shall the franchisor register with a regulatory or professional body before establishing a franchising business system?
Before signing a franchise agreement with a franchisee in Indonesia, the franchisor is required to register with the Indonesian Ministry of Trade and acquire a certificate of franchise registration known as Surat Tanda Pendaftaran Waralaba in the Indonesian language.
4. How can a franchisor make sure that a franchisee follows all business systems, standards, and requirements?
A franchisor can make sure that a franchisee complies with all business systems, standards, and requirements through continuous and regular assistance and supervision to the franchisee. The franchisor can also require the franchisee to come up with a business plan and submit a business development report that meets the franchisor’s standards.
How Cekindo can Assist
For a franchise business in Indonesia, it is a big opportunity for global entrepreneurs and investors. Indonesia is a meeting point between Southeast Asia and other parts of the world, serving as the important business and tourist hubs in the world.
Due to the huge investments in progress, the development of franchise business in Indonesia is deemed to increase substantially in the next few years.
Cekindo can serve as your excellent point of reference as your franchise business consultant in Indonesia thanks to our track record of collaboration with international companies, a team of professionals in diverse fields, and experience gained over the years.
Start your profitable franchise business with Cekindo now in one of the most important destinations of global finance. Fill in the form below for further discussion.