Steps to know about doing Franchise Business in Indonesia

Beginning business in Indonesia as a franchisee a great way to make use of a well known brand while launching a brand new organization.

The purchasing power of individuals of middle-class in Indonesia had been developing as much that franchising, each domestic and global, has increased quite fast as leading business sales and investment.

However, the country additionally has an in depth and complicated franchise regulatory regime, especially in terms of the range of rules that ultimately makes it hard for people who wants to run a franchise in Indonesia.

This article outlines the necessities for franchise registration and what methods need to be taken to begin your franchise business in Indonesia.

Putting in place a franchise business in Indonesia

The Franchisee and Franchisor are the 2 key entities in a franchised system, and in Indonesia, they can be both an individual or legal entity.

Types of Franchisor and Franchisee

TypeExplanation
FranchisorMaybe a resident or non-resident relying on whether or not the legal entity is registered in Indonesia or not.
Sub-FranchisorAn organization or an individual who has given the right by the franchisor to use its powers, generally in particular geographic location. In addition to the franchisor, it could be either a resident or non-resident.

Obligations of the Franchisee and Franchisor

The franchise should use domestically produced items and/or services for as a minimum 80% of its raw materials, commercial enterprise device, and products.

Franchise need to submit an annual record on the development of the franchise to the authority, which issued the franchise registration certificates (Surat Tanda Pendaftaran Waralaba) by 31st March of every year.

Three stuff you want to know about Franchising in Indonesia

  1. There’s no rule for a franchisor to do a trial earlier than franchising or to take initial payments from franchisees
  2. There’s no obligatory membership of any Indonesian agencies or organizations for franchisors or franchisees to perform or undertake business in Indonesia
  3. Each franchisor and franchisee is required to acquire STPW, and failure to achieve this can have a few sanctions, including a written warning for three times and a penalty as much as a maximum of IDR 100 million

Conditions to form a Franchise

The Business (called Franchise)The Franchisor
  • Have a completely unique selling proposition/ particular business characteristics
  • Have written sop on the quality and service of the products or offerings being sold
  • Easy to study and implemented in order that it could be duplicated
  • Has been confirmed to generate profits
  • Should have registered intellectual property/rights
  • Wishes to function the activities, which allowed as per the given license
  • Can sell helping service or products, which not exceeds 10% from the real given license. As an instance, when you have a license to sell beverages, you may sell a few tumblers
  • Doesn’t always need a legal entity, however there could be a higher tax implication while your franchisee is paying the royalty
  • Need to have around five years of experience within the business
  • Should have written sop on quality and service of the products or services being offered
  • Capable to offer continuity of help to its franchisees

The disclosure file should be registered and the franchisor should have obtained the franchise registration certificates before involving with a franchise agreement with a franchisee on Indonesia. The real registration generally takes up to three months or more to finish – however we could shorten this for you!

How to acquire a franchise registration certificates (Surat Tanda Pendaftaran Waralaba/STPW)

The table below implies each parties’ primary requirement to acquire STPW. This STPW/Surat Tanda Pendaftaran Waralaba is valid for five years and is extendable.

FranchisorFranchisee
  • Sign up the prospect of offering of the Franchise program to the ministry of trade.
  • The possibility of the offer will be legalized by  a public notary and Indonesian embassy (trade attached) in which the franchisor is positioned.
  • To offer Master Franchise agreement
Sign up Franchise agreement to the ministry of trade.

 

Each prospect of offer and master franchise agreement must not be in opposition to indonesia regulation is associated with franchise business – we are here to check them for you.

Franchise Agreement

The franchisor has to provide the prospect of the offer at the franchise business to franchisee latest 2 weeks earlier than signing the franchise agreement

The possibility offer needs to be in Bahasa Indonesia

Franchise agreement need to be primarily based on Indonesian law and in bahasa Indonesia

Pre-contract disclosure necessities

  • The statistics below should be particular in the disclosure file:
  • The Franchisor’s proof of identification
  • The legal files of the Franchise business
  • The Franchisor’s business records
  • The Franchisor’s organizational structure
  • Audited balance sheets for the closing years, besides for micro and small businesses
  • The wide variety of franchise businesses
  • A list of the franchisees
  • The rights and obligations of the Franchisor and the Franchisee

As a disclosure file made by a foreign franchisor ought to be legalized, we also provide a legalization service.

Franchise business – Technical requirements

  • Each Franchisor and Franchisee is required to use as a minimum 80% of the raw materials from Indonesia. Through means, commercial enterprise equipment and products in a business need to be locally produced.
  • All franchisors should cooperate with small and medium-scale corporations as Franchisees or providers to show their functionality and to satisfy with the Franchisor’s requirements Keep in mind these requirements when you remember being concerned in a Franchise business.

Considering buying a Franchise business in Indonesia?

We’ve got all of the statistics you want that will help you decide whether or not franchising is right for you.

Becoming a Franchisor may not be an automatic way to success, however, with our help, your business will display a confirmed direction to speedy increase. Further to that, current laws of Indonesia’s regulating franchising are designed to guard small businesses or consumers, therefore franchising remains one of the most secure methods for anybody who desires to become a business owner.

If you have additional questions, let us know by sending an email to [email protected]

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