How to Set Up Franchise in Indonesia

Franchise business has been growing rapidly in Indonesia. However, this country has rather complex and comprehensive franchise regulatory regime. If you are not well-informed about this regulations, it will be difficult for you to run a franchise here. So read through to know more about how to set up a franchise in Indonesia.

Franchise, Franchisor, Franchisee
Before talking further about setting up a franchise business, it is better and essential to define what a “franchise” means. A franchise is a unique business system, where an individual or an entity has a special right to use a brand (of goods and/or services) that has been successful, under a franchise agreement. In a franchise system, you can either be a franchisor or a franchisee. 

A franchisor is a company that allows a person or an entity runs a location of their business. A franchisor is usually a well-known company or brand, has a special trademark, and surely ‘healthy’ as a business. While a franchisee is the one who purchases a franchise, and then runs a location of the franchise business. 

General Requirements to Set Up a Franchise Business
To create a franchise business or become a franchisor in Indonesia, you must complete various criteria as follows:
 Have a specific business characteristic or unique selling proposition that cannot be easily copied by others
 Must have at least 5 years of experience 
 Possess a written Standard Operational Procedure (SOP) as an appropriate business—dos and don’ts—guide, including how to overcome problems
 Should be easy to learn and applied, so that inexperienced franchisee can duplicate
 Have already registered Intellectual Rights/Property
 Proven to be profitable
 Have the ability to give continuous support to all its franchisees 
 At least 80% of the raw materials, business equipments, and merchandise used by both franchisor and franchisee must be domestically produced (from Indonesia)
 A franchisor must co-operate with small-scale and medium-scale companies as suppliers or franchisees; this action is to prove their capability to satisfy the franchisor’s requirements

Aside from those requirements, to set up a franchise in Indonesia you should be registered to the Ministry of Trade and must also obtain the franchise registration certificate or Surat Tanda Pendaftaran Waralaba (STPW). Only after owning the STWP then you can proceed to build a franchise agreement with an Indonesian franchisee. 

Franchise Agreement
Upon the carrying into a franchise agreement, a franchisor has to provide an offering-prospectus. The prospectus document has to be in Indonesian language and contains—among others: the franchisor’s proof of identity, business histories, financial statements, organizational structure, list of franchisees, other legal documents, also the rights and obligations of the franchisee and the franchisor.

The franchise offering-prospectus must be submitted to the Ministry of Trade; and once it is registered, the franchisor and franchisee can move on into a franchise agreement. As well as the prospectus, a franchise agreement should also be written in the Indonesian language and surely must comply with Indonesia’s law. 

This is the final step on how to set up franchise in Indonesia. If everything is in order, the Ministry of Trade will then issue a franchise registration certificate, and you can legally become a franchisor and develop your franchise business in Indonesia.

Source Smart Legal Network