This content is from: Local Insights

New rules for Indonesian franchises

Freddy KaryadiOene Marseille
The Indonesian Minister of Trade recently issued its Regulation Number 53/M-DAG/PER/8/2012 regarding the Implementation of Franchise. It replaced the Regulation of Minister of Trade Number 31/M-DAG/PER/8/2008 regarding the Implementation of Franchise.

The main changes in the 2012 Regulation are as follows:

A franchisor may not appoint a franchisee which is directly or indirectly controlled by the franchisor; the 2008 Regulation does not stipulate this provision.

In the event of the franchise agreement being unilaterally terminated by the franchisor before the lapse of the franchise agreement, the franchisor is not able to appoint a new franchisee covering the same area, before the achievement of dispute resolution by both parties (clean break) or until the issuance of a binding court decision. The 2008 Regulation stipulates that the franchisor is able to appoint a new franchisee covering the same area before the achievement of dispute resolution by both parties or no later than six months after the termination of the franchise agreement.

A franchisor and franchisee which already hold the certificate of franchise registration must use the franchise logo.

The franchisor and franchisee are obliged to use raw materials, business equipment and sell goods in no less than 80% of the goods and/or services that are produced domestically, unless permitted otherwise by the Minister with a recommendation from the Evaluation Team.

A franchisor must corporate with the so-called micro-small and medium-scale enterprises in the local area as a franchisee or a supplier of goods and/or services to the extent that fulfils the requirement.

The franchisor and franchisee are only permitted to carry out business activities as per the business licence they hold. In this matter, the franchisor and franchisee may sell goods that support the principal business in as many as 10% of the total types of goods sold.

Oene Marseille and Freddy Karyadi

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