{"id":150284,"date":"2026-10-07T11:20:00","date_gmt":"2026-10-07T11:20:00","guid":{"rendered":"https:\/\/www.legal500.com\/guides\/?post_type=comparative_guide&#038;p=150284"},"modified":"2026-10-13T08:52:27","modified_gmt":"2026-10-13T08:52:27","slug":"indonesia-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/www.legal500.com\/guides\/chapter\/indonesia-franchise-licensing\/","title":{"rendered":"Indonesia: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-150284","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-indonesia"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Makarim &amp; Taira S.<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2022\/04\/Untitled-design.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Makarim &amp; Taira S.<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2022\/04\/Untitled-design.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Franchise &amp; Licensing laws and regulations applicable in Indonesia<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a legal definition of a franchise and, if so, what is it?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Article 1(1) of Government Regulation No. 35 of 2024 on Franchise (\u201cGR 35\/2024\u201d), a franchise is defined as special rights held by individuals or business entities over a business system, with criteria that have been established in order to market goods and\/or services that have proven to be successful and can be utilized and\/or used by other parties based on a franchise agreement.<\/p>\n<p>Furthermore, Article 4 of GR 35\/2024 sets out the criteria that a business must satisfy in order to qualify as a franchise, as follows:<\/p>\n<p><strong>a. Business System:<\/strong> The business must have a structured system in place, which includes operational standards and procedures covering at least the following areas:<\/p>\n<p>(1) Human resource management<br \/>\n(2) Administration<br \/>\n(3) Operational management<br \/>\n(4) Standard methods of operation<br \/>\n(5) Selection of business locations<br \/>\n(6) Design of business premises<br \/>\n(7) Employee requirements<br \/>\n(8) Marketing strategy<\/p>\n<p><strong>b. Profitability:<\/strong> The business must demonstrate profitability, evidenced by at least three consecutive years of operation, along with financial statements for the last two years showing a profit. These statements must be audited by a public accountant and receive an unqualified opinion, confirming they are accurate and without issues.<\/p>\n<p><strong>c. Intellectual Property Rights:<\/strong> The business has registered intellectual property rights.<\/p>\n<p><strong>d. Continuous Support from the Franchisor:<\/strong> The franchisor provides ongoing support to the franchisee, including training, operational management, promotion, research, market development, and other forms of guidance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any structuring considerations for foreign franchisors (e.g. use of master franchisees, local presence requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Apart from satisfying the criteria set out in #1 above, there are no additional requirements specifically applicable to foreign franchisors seeking to offer or sell a franchise in Indonesia.<\/p>\n<p>In practice, the Ministry of Trade (\u201cMOT\u201d) has adopted a more prudent approach in reviewing Franchise Registration Certificate (Surat Tanda Pendaftaran Waralaba or \u201cSTPW\u201d) applications. It seeks to ensure that only well-established businesses with a proven operational track record are granted an STPW. As a result, the MOT generally expects the franchisor to be the entity that directly operates the business to be franchised, rather than an entity established solely to own or license the franchise system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements that must be met prior to the offer and\/or sale of a franchise? If so, please describe and include any potential consequences for failing to comply.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Before offering and\/or selling a franchise in Indonesia, a franchisor must first obtain a STPW. As part of the STPW application process, the franchisor is required to submit a Franchise Offering Prospectus, or franchise disclosure document (\u201cFDD\u201d) to the MOT, which is defined as a written statement provided by the franchisor or subfranchisor to a prospective franchisee or prospective subfranchisee, containing information regarding the business to be franchised.<\/p>\n<p>If the FDD is made in English language, then it along with all the attachments must be translated by a sworn translator to official Indonesian language. In addition, the FDD must contain the following minimum required information:<\/p>\n<p>a. Identity details of the franchisor or subfranchisor;<br \/>\nb. Business legality of the franchisor or subfranchisor;<br \/>\nc. History of the business operations;<br \/>\nd. Organizational structure of the franchisor or subfranchisor;<br \/>\ne. Business system;<br \/>\nf. Financial statements for the past two (2) fiscal years;<br \/>\ng. Number of business outlets or business locations;<br \/>\nh. List of franchisees or subfranchisees;<br \/>\ni. Rights and obligations of the franchisor or subfranchisor and the franchisee or subfranchisee; and<br \/>\nj. Intellectual property certificates or certificates of recordation of intellectual property.<\/p>\n<p>Once the MOT is satisfied that the franchisor has fulfilled all requirements relating to the FDD, it will issue the STPW. Furthermore, before executing the franchise agreement, the franchisor must provide the FDD to the prospective franchisee at least 14 calendar days prior to the execution of the franchise agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any registration requirements for franchisors and\/or franchisees? If so, please describe them and include any potential consequences for failing to comply. Is there an obligation to update existing registrations?  If so, please describe.  Are there any practical or timing implications (e.g. typical registration timelines, delays in practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In addition to the franchisor&#8217;s obligation to obtain an STPW (as discussed in #2 above), the franchisee is also required to obtain its own STPW prior to commencing its business operations, following the execution of the franchise agreement. This is done by submitting the executed franchise agreement to the MOT through its online system. The franchise agreement to be submitted must meet the following minimum provisions:<\/p>\n<p>a. The names and addresses of the franchisor or subfranchisor and the franchisee or subfranchisee;<br \/>\nb. Intellectual property that remains under protection;<br \/>\nc. Business activities;<br \/>\nd. Business system;<br \/>\ne. The rights and obligations of the franchisor or subfranchisor and the franchisee or subfranchisee;<br \/>\nf. Assistance, facilities, operational guidance, training, and marketing support provided by the franchisor or subfranchisor to the franchisee or subfranchisee;<br \/>\ng. Business territory;<br \/>\nh. A guarantee from the franchisor or subfranchisor to the franchisee or subfranchisee to provide compensation and\/or grant the rights under the franchise in the event that the franchisor or subfranchisor ceases its business operations;<br \/>\ni. The term of the franchise agreement;<br \/>\nj. The procedure for payment of fees;<br \/>\nk. Ownership of, and transfer of ownership of, the franchise;<br \/>\nl. Dispute resolution;<br \/>\nm. Procedures for the renewal and termination of the franchise agreement;<br \/>\nn. guarantee from the franchisor or subfranchisor that it will continue to perform its obligations to the franchisee or subfranchisee; and<br \/>\no. The number of outlets\/business locations to be operated by the franchisee or subfranchisee.<\/p>\n<p>Failure to obtain the required STPW may result in the franchisor or franchisee, as applicable, being subject to administrative sanctions. Under Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing, a business operator that, through supervisory measures, is found to be non-compliant with the applicable business licensing requirements in the trade sector, including the requirement to obtain an STPW, may be subject to administrative sanctions. Such sanctions may include written warnings, temporary suspension of business activities, government coercive measures, and\/or administrative fines.<\/p>\n<p>There is no requirement to periodically renew or update an existing franchise registration. However, if there are any changes to the FDD (other than changes to the financial statements for the past two (2) fiscal years, the number of business outlets or business locations, or the list of franchisees or subfranchisees) or to the franchise agreement, the STPW must be updated through the OSS system.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements (franchise specific or in general)? If so, please describe them (i.e. when and how must disclosure be made (is there a minimum disclosure period before signing or payment (e.g. cooling-off period)), is there a prescribed format, must it be in the local language, do they apply to sales to sub-franchisees) and include any potential consequences for failing to comply.   Is there an obligation to update and\/or repeat disclosure (for example in the event that the parties enter into an amendment to the franchise agreement or on renewal)? What are the consequences of late or incomplete disclosure?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Please refer to our responses to Nos. 3 and 4 regarding the disclosure requirements. A cooling-off period is not a statutory requirement; however, the contracting parties may agree to add such clause in their franchise agreement.<\/p>\n<p>The franchisor is required to provide the Franchise Disclosure Document (FDD) to prospective franchisees at least 14 calendar days prior to the signing of the franchise agreement. The minimum requirements for the FDD and the circumstances triggering an obligation to update the FDD are explained in No. 3 above.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If the franchisee intends to use a special purpose vehicle (SPV) to operate each franchised outlet, is it sufficient to make disclosure to the SPVs' parent company or must disclosure be made to each individual SPV franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The disclosure must be made to the actual entity registered as the franchisee and cannot be made through its parent company.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What actions can a franchisee take in the event of mis-selling by the franchisor?  What are the main legal grounds for such claims (e.g. misrepresentation, statutory disclosure breaches, unfair commercial practices)?  To what extent can liability be excluded or limited by non-reliance or entire agreement clauses or disclaimers in the franchise agreement, disclosure document or sales material?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisee may, depending on the circumstances, pursue contractual and\/or other civil remedies against the franchisor where the franchisor has provided materially false or misleading information or failed to comply with its statutory obligations. The relevant legal grounds may include breach of contract, invalidity of the agreement based on defects in consent, and violations of applicable consumer protection requirements, where applicable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Would it be legal to issue a franchise agreement on a non-negotiable, \"take it or leave it\", basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>GR 35\/2024 sets out the minimum requirements for a franchise agreement, including the rights and obligations of the franchisor and franchisee that must be included therein. Under the principle of freedom of contract under Indonesian law, there is no explicit prohibition against issuing a franchise agreement on a non-negotiable, \u201ctake it or leave it\u201d basis. However, the terms of the agreement must comply with the applicable mandatory requirements under Indonesian law.<\/p>\n<p>It is also important to note that Article 1338(3) of the Indonesian Civil Code requires an agreement to be performed in good faith. Consistent with this principle, GR 35\/2024 requires the franchisor and franchisee to have equal legal standing and requires the franchisor to provide continuous support to the franchisee. Accordingly, while the parties may agree on the terms of a franchise agreement on a non-negotiable basis, the agreement and its implementation should nevertheless reflect these mandatory requirements and the principle of good faith under Indonesian law.<\/p>\n<p>In addition, the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha &#8211; \u201cKPPU\u201d), the Indonesian authority responsible for enforcing Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (as amended) (\u201cLaw No. 5\/1999\u201d), has issued KPPU Regulation No. 6 of 2009 on the Guidelines for the Exemption from the Application of Law No. 5\/1999 to Agreements Relating to Franchises (\u201cKPPU Franchise Guidelines\u201d). The KPPU Franchise Guidelines provide guidance on the scope and limitations of the exemption applicable to franchise agreements under Article 50(b) of Law No. 5\/1999 and identify certain provisions that may potentially raise competition law concerns.<\/p>\n<p>The provisions identified in the KPPU Franchise Guidelines include:<\/p>\n<p>a. Online or marketplace sales restrictions: These are not automatically prohibited, but should be objectively connected to brand protection, service standards, territory management, product authenticity or regulatory compliance. A complete prohibition, particularly by a franchisor with market power, carries greater risk than proportionate channel standards or territorial allocation.<\/p>\n<p>b. Exclusive supply: This is generally defensible where required to maintain quality, consistency, food safety, intellectual property protection or traceability. It is riskier if equivalent suppliers are excluded without objective justification, if unrelated products are tied to the franchise, or if the arrangement forecloses a material part of the market.<\/p>\n<p>c. Retail pricing: Mandatory fixed or minimum resale prices are high-risk under Article 8 where they may result in unfair competition. Recommended prices are safer if genuinely non-binding. Maximum prices are generally less problematic but may still be reviewed if they operate as fixed prices in practice or facilitate coordination.<\/p>\n<p>d. Dual distribution: A franchisor may operate company-owned outlets, sell online and appoint franchisees. There is no general prohibition on this hybrid model. However, the franchisor should manage competitively sensitive information, avoid unjustified discrimination, respect contractual territories and ensure that arrangements do not amount to market allocation or abuse of dominance.<\/p>\n<p>e. Territorial exclusivity: This can be included and Government Regulation 35\/2024 itself requires clear territory allocation where multiple franchisees are appointed. Nevertheless, territorial provisions should not be used to support broader market division or anticompetitive coordination unrelated to operating the franchise system.<\/p>\n<p>Accordingly, while a non-negotiable approach is not expressly prohibited, the provisions of the standard-form franchise agreement should be reviewed to ensure that they comply with applicable mandatory requirements and do not contain restrictions that may fall outside the scope of the franchise exemption or otherwise raise concerns under Indonesian competition law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are trademarks, know-how, trade secrets and copyright protected in your country?  Are there any specific requirements or risks relating to the licensing of know-how and trade secrets in a franchise context?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Trademarks, copyright and trade secrets are protected under separate intellectual property regimes in Indonesia. Registered trademarks are protected under Law No. 20 of 2016 on Trademarks and Geographical Indications (as amended), copyright is protected under Law No. 28 of 2014 on Copyright (as amended), and trade secrets are specifically protected under Law No. 30 of 2000 on Trade Secrets (as amended). GR 35\/2024 also expressly recognizes intellectual property, including trademarks, copyright, patents and trade secrets, as relevant intellectual property in the franchise context. Specifically, provisions relating to licensing arrangement are as follows:<\/p>\n<p>a. A registered trademark may be licensed to another party, and the trademark licence agreement should be recorded with the Directorate General of Intellectual Property (\u201cDGIP\u201d). An unrecorded trademark licence does not have legal effect against third parties.<\/p>\n<p>b. Trade secrets may be licensed to another party under a licensing agreement. The licence must be recorded with the DGIP, and an unrecorded licence does not have legal effect against third parties.<\/p>\n<p>c. Copyright may also be licensed under a written licence agreement. The licence may provide for a specified term and royalties, with the amount and payment mechanism agreed between the parties.<\/p>\n<p>Meanwhile, there is no specific statutory intellectual property regime governing \u201cknow-how\u201d as a standalone category in Indonesia. Depending on the nature and characteristics of the relevant know-how, it may potentially be protected as a trade secret if it satisfies the requirements under Law No. 30 of 2000, namely that the information is confidential, has economic value, and is subject to reasonable efforts to maintain its confidentiality. Know-how that does not satisfy these requirements would not necessarily benefit from statutory trade secret protection and would generally need to be protected through contractual arrangements, including confidentiality and non-disclosure provisions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any franchise specific laws governing the ongoing relationship between franchisor and franchisee? If so, please describe them, including any terms that are required to be included within the franchise agreement.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Government Regulation 35\/2024 regulates not only pre-contractual disclosure and registration but also the continuing relationship. Among other requirements:<\/p>\n<p>a. The parties must have equal legal standing and Indonesian law must apply.<\/p>\n<p>b. A franchisor is entitled to receive the agreed remuneration but must provide continuous support. This support includes training on the franchise management system, operational-management guidance, promotion, market development, and other appropriate guidance.<\/p>\n<p>c. A franchisee is entitled to use the franchisor\u2019s intellectual property and is required to observe the applicable code of ethics and protect the confidentiality of that intellectual property.<\/p>\n<p>d. Where more than one franchisee or sub-franchisee is appointed, the franchisor must establish clear business-territory allocations.<\/p>\n<p>e. Franchisors and franchisees must hold the appropriate STPW, display the prescribed franchise logo, and submit annual franchise activity reports through the Online Single Submission system. The annual report is generally due by 30 June of the following year.<\/p>\n<p>f. Franchise operators must prioritise domestically produced goods and services, use local processing where appropriate, and cooperate with local micro, small and medium enterprises that satisfy the franchisor\u2019s written quality standards.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any aspects of competition law that apply to the franchise transaction (i.e. is it permissible to prohibit online sales or use of online marketplaces (e.g. Amazon, third-party platforms), insist on exclusive supply, fix or set maximum retail prices, operate dual distribution\/hybrid franchisor models)? If applicable, provide an overview of the relevant competition laws.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In addition to our answers in point #9, where the franchisee is a micro, small or medium enterprise partnering with a large enterprise, Law No. 20 of 2008 also applies. The relationship must preserve the franchisee\u2019s independence and must not permit the large enterprise to \u201cown or control\u201d the smaller business. Such partnerships are supervised by the Indonesian Competition Commission under Commission Regulation No. 2 of 2024.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any ESG, compliance or supply chain-related legal requirements impacting franchise systems?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no single franchise-specific ESG code. However, several requirements materially affect franchise systems:<\/p>\n<p>a. GR 35\/2024 requires priority to be given to Indonesian goods and services that meet the franchisor\u2019s written standards, cooperation with qualifying local micro, small and medium enterprises, and priority for domestic processing of raw materials.<\/p>\n<p>b. Consumer-protection, product safety, labelling, advertising, environmental, waste-management, building, fire-safety, occupational health and safety, halal, food and drug, and sector-specific licensing requirements apply according to the business.<\/p>\n<p>c. Food, beverage, cosmetics and other affected systems must account for the halal-certification regime under Law No. 33 of 2014, Government Regulation No. 42 of 2024, and its implementing regulations, including traceability and segregation throughout storage, packaging and distribution.<\/p>\n<p>d. Franchisees that are micro, small or medium enterprises must retain operational and legal independence. Excessive financial or operational control may breach the partnership rules.<\/p>\n<p>e. Anti-bribery controls are important where the system interacts with licensing, inspections, public procurement or government officials. Indonesian corporate liability can arise for corruption committed for a corporation\u2019s benefit.<\/p>\n<p>f. Listed companies and regulated financial institutions may also be subject to sustainability reporting requirements, but these do not automatically apply to the entity in a franchise arrangement, unless they are publicly listed.<\/p>\n<p>The franchise agreement should allocate responsibility for product approvals, supplier due diligence, recalls, environmental compliance, halal integrity, human-rights policies, whistleblowing and regulatory reporting, as applicable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are in-term non-compete and non-solicitation clauses enforceable and are there any limitations on the franchisor's ability to impose and enforce them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>KPPU 6\/2009 recognises that a restriction preventing a franchisee from conducting the same or a competing business may qualify for the exemption where it is necessary to:<\/p>\n<p>a. protect the franchisor\u2019s intellectual property rights and confidential know-how;<br \/>\nb. preserve the common identity and reputation of the franchise network; or<br \/>\nc. protect the knowledge, experience, expertise and technical skills transferred to the franchisee.<\/p>\n<p>Although the relevant discussion in KPPU Guidelines principally addresses post-termination restrictions, the same rationale supports an in-term non-compete restriction where it is genuinely necessary to protect the franchise system. An in-term restriction is therefore more likely to be enforceable if it is confined to businesses that compete with the franchised business and applies only for the duration of the franchise agreement.<\/p>\n<p>The restriction may fall outside the Article 50(b) exemption if it is broader than necessary, is unrelated to the protection of the franchise system or intellectual property, or has the purpose or effect of restricting markets, consumers, technology or competition. The clause should therefore clearly define:<\/p>\n<p>a. the competing activities covered;<br \/>\nb. the relevant territory;<br \/>\nc. the persons and entities subject to the restriction;<br \/>\nd. any permitted passive or minority investments; and<br \/>\ne. the legitimate franchise interests being protected.<\/p>\n<p>KPPU 6 of 2009 does not specifically address non-solicitation clauses. Such clauses should nevertheless be enforceable under general contract law if they are narrowly drafted and reasonably necessary to protect customer relationships, confidential information, know-how or the stability of personnel assigned to the franchise business. A blanket restriction affecting customers or employees who have no material connection with the franchised business would be more vulnerable to challenge.<\/p>\n<p>There is no prescribed statutory maximum duration for an in-term restriction. For comparison, KPPU 6 of 2009 states that, where the franchise technology is already in the public domain and the franchisee\u2019s investment is not substantial, a post-termination non-compete period would ordinarily be one year. This is guidance rather than an automatic maximum and applies specifically to post-termination restrictions. Longer restrictions may not benefit from the franchise exemption if they unnecessarily impede competition or technological development.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there an obligation (express or implied) to deal in good faith in franchise relationships?  If so, what practical effects does this have on the relationship between franchisor and franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Article 1338(3) of the Civil Code expressly requires agreements to be performed in good faith. Government Regulation 35\/2024 also requires equal legal standing and continuous support, while the micro, small and medium enterprise partnership rules emphasise mutual need, trust, strengthening and benefit.<\/p>\n<p>In practical terms, good faith can affect:<\/p>\n<p>a. the accuracy and completeness of disclosures and performance information;<br \/>\nb. the exercise of contractual discretion;<br \/>\nc. changes to operating manuals, sourcing rules or fees;<br \/>\nd. the provision of promised support;<br \/>\ne. territorial encroachment and competing channels;<br \/>\nf. inspection and audit conduct;<br \/>\ng. the provision of reasonable notice and an opportunity to remedy where appropriate; and<br \/>\nh. termination intended merely to appropriate the franchisee\u2019s business or avoid accrued obligations.<\/p>\n<p>Good faith does not normally allow a court to rewrite an otherwise lawful commercial bargain. It may, however, prevent an abusive or dishonest exercise of contractual rights.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any employment or labour law considerations that are relevant to the franchise relationship? Is there a risk that the staff of the franchisee could be deemed to be the employees of the franchisor? What level of operational control may a franchisor exercise without creating employment or agency risk?  What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The franchisee should normally be the sole employer of its staff. Under Indonesian manpower law, an employment relationship is characterised by the elements of work, wages and orders as reflected in the relevant employment agreement. A franchisor is therefore at greater risk if it directly recruits, appoints, pays, disciplines, dismisses or exercises day-to-day control over franchisee personnel.<\/p>\n<p>Brand and operational controls do not, by themselves, normally create employment. A franchisor may generally:<\/p>\n<p>a. prescribe qualifications and training standards;<br \/>\nb. require uniforms and customer-service standards;<br \/>\nc. establish food safety, security and operating procedures;<br \/>\nd. inspect outlets and require remediation;<br \/>\ne. require the removal of a person from brand-facing duties for legitimate safety or compliance reasons; and<br \/>\nf. provide system-wide training.<\/p>\n<p>The franchisor should avoid directly entering into employment contracts, paying wages, determining individual leave or working hours, issuing routine instructions to individual employees, or exercising dismissal powers. The franchisee should retain authority over recruitment, remuneration, scheduling, supervision, discipline and termination.<\/p>\n<p>The agreement and operational documents should expressly state that the franchisee is an independent business and sole employer, require it to comply with manpower, minimum-wage, social-security and occupational-safety laws, and require appropriate indemnities and employment records.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a risk that a franchisee could be deemed to be the commercial agent of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisee is not automatically the franchisor\u2019s commercial agent. The risk arises if the franchisee is authorised, or appears authorised, to negotiate or conclude contracts, make warranties, collect funds or otherwise bind the franchisor.<\/p>\n<p>To mitigate this risk:<\/p>\n<p>a. state expressly that the franchisee is an independent principal and has no authority to bind the franchisor;<br \/>\nb. require sales, invoices, receipts, permits and employment arrangements to be in the franchisee\u2019s own name;<br \/>\nc. prohibit representations of agency, partnership or joint venture;<br \/>\nd. distinguish the franchisor\u2019s trademarks from the legal identity of the outlet operator;<br \/>\ne. require clear customer-facing identification of the responsible franchisee entity;<br \/>\nf. limit powers of attorney and centralised collection arrangements; and<br \/>\ng. ensure that the franchisor does not routinely approve individual customer contracts on the franchisee\u2019s behalf.<\/p>\n<p>A contractual disclaimer will not cure conduct that in fact creates actual or apparent authority of the franchisee but it may mitigate such risks.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws and regulations that affect the nature and payment of royalties to a foreign franchisor and\/or how much interest can be charged? Are there any requirements for payments in connection with the franchise agreement to be made in the local currency?  Are there any restrictions on structuring payments (e.g. royalties vs service fees vs mark-ups)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no franchise-specific cap on royalties. The franchise agreement must state the calculation and payment method. Royalties, initial fees, advertising contributions, technology fees and service fees should be transparent and consistent with the prospectus.<\/p>\n<p>Payments by an Indonesian franchisee to a foreign franchisor are generally permitted, subject to tax withholding, banking documentation, sanctions screening and foreign-exchange reporting requirements. The bank may request the agreement, invoice, tax documentation, intellectual property registration and evidence supporting the remittance.<\/p>\n<p>Law No. 7 of 2011 and Bank Indonesia Regulation No. 17\/3\/PBI\/2015 generally require rupiah for transactions conducted within Indonesia. However, qualifying international commercial transactions and cross-border payments may use foreign currency. A royalty paid by an Indonesian franchisee to a foreign franchisor can generally be structured and remitted in foreign currency if it is genuinely cross-border and properly documented. Domestic payments between Indonesian parties should ordinarily be denominated and settled in rupiah.<\/p>\n<p>There is no general statutory commercial interest cap applicable to an ordinary corporate franchise agreement. Contractual interest must nevertheless be lawful, clearly agreed, commercially reasonable and, between related parties, arm\u2019s length. Excessive interest may be reduced or disregarded by a court or tax authority.<\/p>\n<p>Royalties cannot safely be relabelled as service fees or product mark-ups merely to obtain a different tax result. The classification must reflect the actual economic substance:<\/p>\n<p>a. use of intellectual property or know-how is generally a royalty;<br \/>\nb. identifiable support services may be service fees;<br \/>\nc. if the franchisor sells goods to the franchisee, the price may include a commercial mark-up; and<br \/>\nd. if one payment covers several components (royalty and service fees), the parties should document those components so that the payment can be classified according to what is actually supplied.<\/p>\n<p>Transfer-pricing, withholding-tax, value-added-tax, customs valuation, permanent-establishment and deductibility rules may apply.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to impose contractual penalties on franchisees for breaches of restrictive covenants etc.? If so, what requirements must be met in order for such penalties to be enforceable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Contractual penalties and liquidated-damages clauses are generally permissible under Articles 1249 and 1304 to 1312 of the Civil Code. They should:<\/p>\n<p>a. identify the relevant breach clearly;<br \/>\nb. state an ascertainable amount or calculation;<br \/>\nc. protect a lawful interest;<br \/>\nd. be proportionate to the anticipated loss and commercial risk;<br \/>\ne. avoid double recovery for the same loss; and<br \/>\nf. relate to an otherwise enforceable obligation.<\/p>\n<p>A penalty attached to an unlawful or unenforceable restrictive covenant will not make that covenant enforceable. Courts have discretion in appropriate circumstances, including where the principal obligation has been partly performed, and may resist penalties that are manifestly excessive, punitive or inconsistent with good faith. The agreement should distinguish fixed damages, continuing late-payment interest, indemnified losses and injunctive relief.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What tax considerations are relevant to franchisors and franchisees? Are franchise royalties subject to withholding tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A royalty paid to an Indonesian resident corporate recipient is generally subject to Article 23 withholding tax at 15% of the gross amount. A royalty paid to a non-resident is generally subject to Article 26 withholding tax at 20% of the gross amount, unless reduced by an applicable tax treaty and the foreign recipient satisfies the residence, beneficial-ownership and administrative requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is e-commerce regulated and does this have any specific implications on the relationship between franchisor and franchisee?  For example, can franchisees be prohibited or restricted in any way from using e-commerce in their franchise businesses?  Are there any rules regarding online sales within or outside a franchisee\u2019s territory?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>E-commerce is principally regulated by Government Regulation No. 80 of 2019, the Electronic Information and Transactions Law, consumer-protection legislation and, since June 2026, Minister of Trade Regulation No. 19 of 2026 on the Operation of Trading Through Electronic Systems. Regulation 19\/2026 replaced Minister of Trade Regulation No. 31 of 2023 and covers online retail, marketplaces, social commerce and other platform models.<\/p>\n<p>Depending on the model, the franchisee, franchisor and platform operator may need:<\/p>\n<p>a. appropriate business and electronic-commerce licensing;<br \/>\nb. electronic-system operator registration;<br \/>\nc. compliant product, seller, price and contractual information;<br \/>\nd. consumer complaint and dispute-resolution facilities;<br \/>\ne. compliant electronic advertising;<br \/>\nf. data-protection and cybersecurity measures; and<br \/>\ng. records allowing transactions to be evidenced and audited.<\/p>\n<p>There is no franchise-specific rule giving a franchisee an unconditional right to sell online. The agreement may reserve e-commerce to the franchisor, allocate online orders by territory, restrict marketplace use or impose approved-channel requirements. Such restrictions must be clearly disclosed, contractually agreed and defensible under competition law. Restrictions based on counterfeiting, product safety, service quality or territorial integrity are more defensible than a blanket prohibition intended only to prevent price competition.<\/p>\n<p>The agreement should also address ownership of online accounts, order allocation, fulfilment, returns, customer complaints, advertising expenditure, platform commissions, online pricing and customer data.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the applicable data protection laws and do they have any specific implications for the franchisor\/franchisee relationship?   In particular, what are the key data protection considerations in a franchise relationship, including: (a) allocation of controller\/processor roles; (b) use of customer databases; (c) cross-border data transfers; and (d) marketing and CRM activities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The primary legislation is Law No. 27 of 2022 on Personal Data Protection (\u201cPDP Law\u201d), and the recently issued Government Regulation No. 33 of 2026 on the Implementing Regulation of PDP Law, which will be effective on 16 January 2027. The PDP regime is supplemented by the electronic-systems and other specific sector regulations (ie, Health and Banking).<\/p>\n<p><strong>(a) allocation of controller\/processor roles;<\/strong><\/p>\n<p>The roles depend on actual decision-making, not contractual labels alone:<\/p>\n<p>a. A franchisee will ordinarily be an independent controller for employee data, local customer transactions, and its own legal obligations.<br \/>\nb. The franchisor may be an independent controller for loyalty programmes, central accounts, brand analytics and system-wide marketing.<br \/>\nc. The parties may be joint or separate controllers where they jointly determine purposes and essential processing methods for customer data.<br \/>\nd. An external or third-party processing data solely on documented instructions from the franchisor or franchisee will be considered be a processor.<\/p>\n<p>The agreement should contain a detailed data schedule allocating purposes, lawful bases, notices, security, data-subject requests, retention, breach response, audit rights, deletion and regulatory cooperation.<\/p>\n<p><strong>(b) use of customer databases;<\/strong><\/p>\n<p>The customer database may contain personal data such as customers\u2019 names, contact details, account information, transaction and reservation history, payment information, loyalty-program records, preferences, complaints, online identifiers and responses to marketing communications.<\/p>\n<p>The franchisor and franchisee must identify a lawful basis under Article 20 of the PDP Law for each purpose for which such personal data are processed. Consent is not required for every use of customer data. For example, data necessary to process an order or reservation, provide the relevant goods or services, administer payment or respond to a customer request may generally be processed on the basis that it is necessary to perform a contract with the customer. Data retained to comply with tax, accounting or other statutory requirements may be processed on the basis of a legal obligation. Fraud prevention, network security and certain limited business analytics may potentially be based on legitimate interests, subject to an assessment balancing those interests against the customer\u2019s rights.<\/p>\n<p><strong>(c) cross-border data transfers; and<\/strong><\/p>\n<p>Article 56 of the PDP Law permits transfers outside Indonesia where:<\/p>\n<p>a. the receiving country has an equal or higher level of protection;<br \/>\nb. adequate and binding safeguards are provided; or<br \/>\nc. if neither condition can be satisfied, the data subject\u2019s consent is obtained.<\/p>\n<p>The parties should document the transfer mechanism, security, onward-transfer restrictions, government-access risks and data-subject remedies.<\/p>\n<p><strong>(d) marketing and CRM activities?<\/strong><\/p>\n<p>Marketing requires a valid legal basis, transparency and respect for consent withdrawals and objections. Shared customer lists should not be uploaded into a central customer relationship management system without an allocated lawful basis and appropriate notice. The system should manage consent by brand, entity, channel and purpose; suppress opted-out customers; limit profiling; and apply appropriate rules to children\u2019s and sensitive data.<\/p>\n<p>Where they rely on consent for marketing, consent must be freely given, informed, specific and unambiguous. Customers who refuse marketing consent must continue to receive goods or services without reduced quality, unless the relevant data processing is necessary to provide them. The parties must explain who will receive the data, what offers customers may receive, and how to withdraw consent or report offers that continue after withdrawal. They should retain evidence of consent and ensure the CRM respects each customer\u2019s preferences and withdrawals.<\/p>\n<p>Personal-data breaches must generally be notified in writing to affected data subjects and the authority within 3 x 24 hours after discovery where the statutory conditions are met.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the franchisor permitted to restrict the transfer of (a) the franchisee's rights and obligations under the franchise agreement or (b) the ownership interests in the franchisee?  Can the franchisor impose conditions on transfers (e.g. approval rights, fees, qualification criteria)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. A franchisor may restrict assignment of the franchise agreement and impose approval rights, fees and qualification criteria. GR 35\/2024 expressly requires the agreement to address ownership and transfer of ownership of the franchise.<\/p>\n<p>Restrictions may cover direct assignments, novation, sub-franchising, mergers, changes of control and material indirect ownership changes. Conditions may include:<\/p>\n<p>a. financial and operational qualifications;<br \/>\nb. completion of training;<br \/>\nc. absence of default;<br \/>\nd. execution of the current form of agreement;<br \/>\ne. payment of a reasonable transfer fee;<br \/>\nf. refurbishment or compliance upgrades;<br \/>\ng. regulatory and sanctions checks; and<br \/>\nh. execution of releases or guarantees.<\/p>\n<p>A transfer of shares in the franchisee is legally distinct from an assignment of the franchise agreement. Therefore, changes of control should be regulated expressly. Restrictions in the franchise agreement bind the contracting parties, but separate provisions in the franchisee\u2019s articles of association or shareholders\u2019 agreement may be needed to control the corporate transfer effectively.<\/p>\n<p>Consent should not be exercised arbitrarily where the agreement requires reasonableness or where bad faith would be involved.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent can a franchisor impose audit rights, reporting obligations, and operational controls on a franchisee, and what legal limits apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Broad audit and reporting rights are generally enforceable if stated in the agreement. These may cover revenue, royalties, point-of-sale information, inventory, approved suppliers, advertising funds, food safety, employment compliance, cybersecurity, customer complaints and operating standards.<\/p>\n<p>The limits include:<\/p>\n<p>a. audits must respect confidentiality, data-protection and trade-secret obligations;<\/p>\n<p>b. access should be relevant and proportionate to the franchise relationship;<\/p>\n<p>c. the franchisor should not use audits to obtain unrelated competitively sensitive information;<\/p>\n<p>d. operational controls should preserve the franchisee\u2019s status as an independent business;<\/p>\n<p>e. a large franchisor must not \u201cown or control\u201d a micro, small or medium franchisee contrary to the partnership legislation;<\/p>\n<p>f. controls must not create an employment or agency relationship;<\/p>\n<p>g. unilateral manual changes must be permitted by the agreement and exercised in good faith; and<\/p>\n<p>h. financial audits should distinguish gross-sales verification from unrestricted access to unrelated business records.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a franchisee have a right to request a renewal on expiration of the initial term? In what circumstances can a franchisor refuse to renew a franchise agreement? If the franchise agreement is not renewed or it if it terminates or expires, is the franchisee entitled to compensation? If so, under what circumstances and how is the compensation payment calculated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisee has no statutory right to renewal. Renewal depends on the agreement, which must state the renewal procedure based on Article 6(2)(m) of GR 35\/2024. A franchisor may refuse renewal in accordance with agreed conditions, such as failure to meet standards, unpaid amounts, refusal to refurbish, failure to execute the current agreement or a legitimate decision to withdraw from the market.<\/p>\n<p>There is no general statutory compensation for non-renewal, expiry or ordinary termination. Compensation may arise where:<\/p>\n<p>a. the agreement provides for it;<br \/>\nb. termination or non-renewal breaches the agreement;<br \/>\nc. the franchisor ceases business, in which case Article 6 of GR 35\/2024 requires the agreement to provide a guarantee of compensation and\/or rights over the franchise;<br \/>\nd. the franchisee has a claim for proven damages caused by breach or unlawful conduct; or<br \/>\ne. amounts must be repaid under a specific contractual provision.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory termination rights which may override any contractual termination rights? Is there a minimum notice period that the parties must adhere to?  Are there any requirements regarding notice periods and opportunities to remedy breaches before termination?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>GR 35\/2024 does not prescribe a universal minimum termination notice or cure period. The regulation only provides that Franchise Agreement must state its renewal and termination procedures. Generally, a Franchise Agreement may not be terminated unilaterally and shall automatically expire upon the expiration of the term specified in the Franchise Agreement. The Franchise Agreement may be renewed if mutually agreed by both parties, on terms jointly determined by them.<\/p>\n<p>Termination of the agreement should also be reflected in the appropriate Online Single Submission and STPW records.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any intangible assets in the franchisee's business which the franchisee can claim ownership of on expiry or termination, e.g. customer data, local goodwill, etc.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no rule automatically transferring customer data, local goodwill or other intangible assets to either party upon termination.<\/p>\n<p>Generally:<\/p>\n<p>a. the franchisor retains its trademarks, copyrighted materials, confidential know-how, system manuals and brand goodwill;<br \/>\nb. the franchisee may own its corporate records, local accounting data and assets it independently created;<br \/>\nc. customer data is governed by the PDP Law rather than conventional ownership alone;<br \/>\nd. database structure or software may be protected separately by copyright or contract;<br \/>\ne. local telephone numbers, social-media accounts, websites, reviews and marketplace accounts should be allocated expressly; and<br \/>\nf. there is no automatic compensation for local goodwill unless contractually agreed or recoverable as damages for breach.<\/p>\n<p>The agreement should distinguish brand goodwill from goodwill attributable to the franchisee\u2019s legal entity or location.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What post-termination obligations are typically enforceable (e.g. de-branding, return of confidential information, non-compete, non-solicitation) and how readily are such post-term restrictions enforced in practice?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The following are commonly enforceable:<\/p>\n<p>a. immediate cessation of trademark and system use;<br \/>\nb. de-branding and removal of signs, uniforms and digital branding;<br \/>\nc. return or destruction of manuals and confidential information;<br \/>\nd. cessation of access to central systems;<br \/>\ne. payment of accrued royalties and other amounts;<br \/>\nf. transfer or closure of brand-specific telephone numbers, websites and social-media accounts where agreed;<br \/>\ng. continued confidentiality;<br \/>\nh. cooperation with product recalls and regulatory matters; and<br \/>\ni. narrowly tailored non-solicitation and non-compete obligations.<\/p>\n<p>Confidentiality and intellectual-property restrictions are generally the most readily enforceable. Post-term non-competes are less certain because Indonesia has no franchise-specific statutory requirements, other than those governed in our response above. Nonetheless, enforceability of this depends on legitimate interest, duration, territory, activity scope, competition effects and proportionality. A targeted restriction protecting know-how and preventing immediate replication of the same system is more defensible than a nationwide prohibition on participation in an entire industry.<\/p>\n<p>In practice, court proceedings can be slow, and Indonesian civil procedure does not provide the same predictable injunctive framework as some common-law jurisdictions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a national franchising association? Is membership required?  If not, is membership commercially advisable? What are the additional obligations of the national franchising association?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Indonesian Franchise Association (Asosiasi Franchise Indonesia or AFI) is the principal national association and has operated since 1991. The Indonesian Franchise and Licensing Association (Perhimpunan Waralaba dan Lisensi Indonesia or WALI) is also active.<\/p>\n<p>Membership is not legally required and is not a condition for obtaining an STPW. It may nevertheless be commercially useful for networking, exhibitions, training, government engagement, industry information and credibility.<\/p>\n<p>Association obligations are organisational rather than statutory and may include membership fees, compliance with the constitution or code of conduct, participation requirements and restrictions on misuse of association marks. Association membership does not replace statutory registration or compliance.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are foreign franchisors treated differently to domestic franchisors? Does national law\/regulation impose any debt\/equity restrictions?  Are there any restrictions on the capital structure of a company incorporated in your country with a foreign parent (thin capitalisation rules)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign and domestic franchisors are subject to the same core franchise criteria, disclosure obligations and continuing duties. Foreign franchisors face additional documentary and procedural requirements, including:<\/p>\n<p>a. Indonesian registration of the relevant intellectual property;<br \/>\nb. business licence issued by the competent authority in its home country, apostilled if that country is a party to the Apostille Convention, or legalised by an Indonesian representative in that country (as applicable); and<br \/>\nc. a certificate from the Indonesian Trade Attach\u00e9 or an Indonesian representative in the franchisor\u2019s home country confirming that the franchise business remains in operation.;<br \/>\nd. an Indonesian-law franchise agreement;<br \/>\ne. Indonesian-language documentation; and<br \/>\nf. Indonesian tax and cross-border payment requirements.<\/p>\n<p>A foreign franchisor does not necessarily need to establish an Indonesian subsidiary merely to grant a cross-border franchise. If it establishes or owns an Indonesian operating company, the applicable business classification must be open to foreign investment under the Positive Investment List and sector-specific rules.<\/p>\n<p>There are no franchise-specific debt-to-equity restrictions. A foreign investment limited liability company generally remains subject to a minimum investment plan exceeding IDR10 billion per relevant business classification and project location, excluding land and buildings, subject to sector-specific calculations. Under Minister of Investment and Downstream Industry\/Investment Coordinating Board Regulation No. 5 of 2025, the general minimum issued and paid-up capital was reduced to IDR2.5 billion per company, unless a higher sectoral threshold applies. Restrictions apply to withdrawing that capital during the prescribed period, except for permitted investment and operating uses.<\/p>\n<p>For tax purposes, the general maximum debt-to-equity ratio is 4:1, subject to exemptions. Interest must also satisfy arm\u2019s-length and transfer-pricing standards.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement be governed by local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Article 6(1) of Government Regulation 35\/2024 requires the parties to have equal legal standing and provides that Indonesian law applies to the franchise agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What dispute resolution procedures are available to franchisors and franchisees?  Are there any advantages to out of court procedures such as arbitration versus litigation, in particular if the franchise agreement is subject to a foreign governing law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The parties generally use:<\/p>\n<p>a. negotiation;<br \/>\nb. mediation;<br \/>\nc. Indonesian court litigation;<br \/>\nd. domestic arbitration, including arbitration administered by the Indonesian National Board of Arbitration; or<br \/>\ne. international arbitration.<\/p>\n<p>Indonesian court litigation may be appropriate where local interim relief, third-party claims, regulatory issues or enforcement against local assets are central. Its disadvantages include public proceedings, procedural formality, potential delay and the need to conduct proceedings in Indonesian.<\/p>\n<p>Arbitration offers confidentiality, party selection of arbitrators, technical expertise and easier international enforcement. Indonesia is a party to the New York Convention. Foreign arbitral awards are enforceable through the Central Jakarta District Court if they satisfy the requirements of Law No. 30 of 1999, concern a commercial matter and do not violate Indonesian public order. Foreign court judgments are not directly enforceable in Indonesia. A successful party ordinarily has to commence fresh Indonesian proceedings and use the foreign judgment as evidence. This is an important reason to prefer arbitration in cross-border franchises. Even where arbitration is seated abroad, Indonesian law should govern the franchise agreement. A foreign governing-law clause creates regulatory and enforcement risk because it conflicts with GR 35\/2024.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement and disclosure documents be in the local language?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Under Article 5(3) of GR 25\/2024, if the Franchise Offering Prospectus is prepared in a foreign language, it must be translated into Bahasa Indonesia by a sworn translator.<\/p>\n<p>The franchise agreement must also be made in Bahasa Indonesia under Article 6(4) of MOT 71\/2019, although a sworn translation is not required. Where a foreign party is involved, the agreement may additionally be prepared in English or the foreign party\u2019s national language, in accordance with Article 31 of Law No. 24 of 2009 on the National Flag, Language, State Symbol and National Anthem. A bilingual agreement is therefore commonly used, and the parties may specify the prevailing version in the event of inconsistency.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to sign the franchise agreement using an electronic signature (rather than a wet ink signature)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. A franchise agreement may generally be signed electronically. Neither GR 35\/2024 nor MOT 71\/2019 the requires a wet-ink signature or notarial deed.<\/p>\n<p>Under Article 11 of the Electronic Information and Transactions Law, an electronic signature is legally valid if the statutory requirements concerning attribution, control, alteration detection and consent are met.<\/p>\n<p>35. However, for purposes of signing the Franchise Agreement, a certified electronic signature issued through a recognised electronic certification provider (evidencing Minister of Communications and Digital Affairs registration) offers stronger evidentiary protection than a simple scanned signature. Certified e-sign providers include, among others: vinotek, ezsign, digisign, idntrust.id, xignature, and privy. While we understand that many foreign parties use DocuSign as their preferred e-signature platform, DocuSign on its own is not a certified e-signature provider. However, we understand that it partners with VIDA (a certified e-signature provider). Therefore, it would be best if the parties can execute the document via DocuSign using the VIDA integration in this case to safeguard the evidentiary value as explained above. You may refer to the setup steps here: VIDA.<\/p>\n<p>The use of a certified provider ensures that each signature is supported by a verified digital certificate and appropriate authentication measures, thereby enhancing its evidentiary value.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do you foresee any significant commercial or legal developments that might impact on franchise relationships over the next year or so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The principal foreseeable developments are:<\/p>\n<p><strong>a. Implementation of the new e-commerce regime.<\/strong> Minister of Trade Regulation 19\/2026 took effect on 8 June 2026 and introduces strengthened licensing, seller verification, product information, complaint-handling, domestic-product prioritisation and platform-compliance requirements. Franchise systems using marketplaces, social commerce or centralised online channels should review their allocation of e-commerce responsibilities.<\/p>\n<p><strong>b. Halal compliance from 18 October 2026.<\/strong> The next mandatory phase will affect a broad range of food, beverage, imported, cosmetic, chemical, genetically engineered, health-supplement and consumer-product categories, together with parts of their storage, packaging and distribution chains.<\/p>\n<p><strong>c. Further franchise implementing rules.<\/strong> Minister of Trade Regulation 71\/2019 remains relevant only to the extent consistent with Government Regulation 35\/2024, while Minister of Trade Regulation 25\/2025 deals specifically with regional STPW issuance. Further regulations may replace or consolidate the remaining 2019 procedures.<\/p>\n<p><strong>d. Ongoing Online Single Submission implementation.<\/strong> Franchise systems should expect increased integration of STPW applications, annual reporting and risk-based business licensing, making discrepancies between the agreement, prospectus, intellectual property records, outlet data and actual operations easier for authorities to identify.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">8033<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/150284","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=150284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}