Franchise Agreements in Indonesia

A franchise, under Indonesian regulations, is defined as a special right owned by an individual or a legal entity to a unique business system that has proven successful in selling goods and/or services, and can be used by another party based on a Franchise Agreement.

Franchise Agreement

A franchisor in Indonesia must deliver a draft of the Franchise Agreement to the franchisee at least two weeks prior to its execution. The Franchise Agreement must be translated into the Indonesian language, but there is no express rule on whether the Indonesian version of the Franchise Agreement must prevail if there is a difference in interpretation between the Indonesian and English texts.

The Franchise Agreement must be governed by Indonesian law. The parties to the Franchise Agreement must also comply with the laws and regulations related to their business activities, such as laws and regulations in the fields of consumer protection, health, education, environment, spatial layout, employment and intellectual property.

The Franchise Agreement should contain at least the following:

• names and addresses of the parties;
• types of intellectual property rights;
• business activities;
• the rights and duties of the parties;
• assistance, facilities, operational training and marketing guidance provided by the franchisor to the franchisee;
• business areas;
• term of agreement;
• payment of remuneration;
• ownership, change of ownership, and the rights of heirs;
• dispute resolution;
• procedure for the renewal, expiration and termination of the agreement. Please note that the agreement cannot be terminated unilaterally prior to the expiration of the agreement; and
• the number of outlets that will be managed by the franchisee.

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