Franchise 101: A Complete Guide to Starting a Franchise Business in Indonesia

What is a Franchise?

A franchise, or waralaba, is a business model that allows an individual or a business entity to use an already proven business system to market products or services. According to PP 35/2024, a franchise grants specific rights to a party through an agreement, allowing them to utilize this successful business model.

Minister of Law and Human Rights Approval in Franchise Business: Is It Relevant?

Many people think that approval from the Minister of Law and Human Rights is required to operate a franchise business. However, this is not entirely accurate. The Minister of Law and Human Rights’ approval is related to the establishment of a limited liability company (PT). Once the company is registered with the Minister, it is officially recognized as a legal entity.

However, when it comes to franchise operations, the authority lies not with the Minister of Law and Human Rights but with the Minister of Trade. Franchise management is governed by Permendag 71/2019, which makes the Minister of Trade responsible for issuing the Franchise Registration Certificate (STPW).

Franchise Process and Agreement

A franchise is not just about having the right to use a business system; it also requires a clear agreement between the franchisor and the franchisee. This agreement includes:

1. The names and addresses of the involved parties

2. Intellectual property rights

3. Details of the business system

4. The rights and obligations of each party

The franchisor must also register a franchise offering prospectus, which is a complete description of the business being franchised. This prospectus must be provided to the potential franchisee at least two weeks before the agreement is signed.

Franchise Registration Certificate (STPW)

The STPW is official proof that a business has been registered as a franchise operator. The STPW application is done through the OSS system and is applicable for both domestic and international franchisors and franchisees.

Franchise Business Criteria

Not all businesses can be franchised. A business must meet certain criteria to qualify as a franchise, including:

1. Having a unique business characteristic

2. Proven to be profitable

3. Having clear operational standards

4. Easy to teach and implement

5. Providing ongoing support from the franchisor

6. Possessing registered intellectual property rights

Franchising is an exciting business option since you can start with a proven system. However, it’s essential to understand the rules before diving in. Approval from the Minister of Trade, drafting agreements, and obtaining an STPW are some key steps to ensure your business operates smoothly and legally.

If you need further assistance in understanding franchise regulations or help with STPW registration, feel free to contact the Accenta team. We’re ready to help you get started!