MINISTRY OF TRADE REGULATION NO. 72 OF 2019 REGARDING FRANCHISING (“MOT No. 72/2019”)

July 28, 2020 | Regulatory Updates


The Minister of Trade of the Republic of Indonesia has enacted MOT No. 71/2019 on 4 September 2019 in which the key provisions are outlined below.

A. Criteria

MOT No. 72 of 2019 regulates the criteria of a franchise which are as follows:

1. to havedistinctive business characteristics, that is defined as a business that has advantages or differences which cannot be easily imitated when compared to other similar businesses which, in turn, then attracts consumers by way of the characteristics/qualities such as system management, selling and service or arrangement method, or distribution method which is/are particular to that specific franchisor;

2. to havebeen proven to be profitable, which can be demonstrated by having at least five years’ worth of experience as a franchisor in the business, and by already having business strategies in place to tackle the associated business problems; Which, in this case, are proven by the survival and development of the franchisor’s business in profitable manner;

3. to have a written standard for the services and goods and/or services offered;

4. to be easily applicable, which is demonstrated by way of the ability of the franchisee to implement the business in good manner in accordance with the operational and management guidance provided by the franchisor without the benefit of having prior knowledge and/or experience of operating within that specific business sector.

5. the availability of ongoing support, given by the franchisor in the form of operational guidance, trainings, and promotions; and

6. a registered the Intellectual Property Rights, which is related to the business i.e. trademarks and/or copyrights and/or patent and/or license and/or the trade secret has been registered and has a certificate or is in the process of being registered for a certificate at/through the authorized agency.

B. Franchise Agreement

The franchisor or the successor of the franchisor must provide franchise prospectus to the franchisee or prospective franchiseeat least 2 (two) weeks prior to the execution of the franchise agreement. If the franchise prospectus is written foreign language, then it must be translated into Indonesian language through an official mean. It is required to enter into a franchise agreement that is governed under Indonesian law and written in Indonesian language.The franchise agreement must be provided to the franchisee at least 2 (two) weeks prior to the execution of the franchise agreement.

C.The Requirement to Register and Obtain Registration Certificate of Franchise (Surat Tanda Pendaftaran Waralaba - STPW)

 

It is a mandatory requirement for the franchisor or the successor of the franchisor to register the franchise prospectus prior to the preparing of a franchise agreement. Likewise, the franchisee or the successor of the franchisee must register the franchise agreement. Foreign franchise prospectus must be legalized by a public notary by way of attaching a statement letter from an Indonesian Trade Attaché or an Indonesian government representative in the country of origin. This requirement to register is for the purpose of obtainingSTPW for franchisor, successor of franchisor, the franchisee and successor of franchisee which can be applied for through Online Single Submission.

 

 

D. The Requirement to Display Franchise Logo

Generally it is requirement for all franchisors, franchisee and their successors display their franchise logo. However, there is no obligation for foreign franchisor to display their franchise logo.