New Indonesian Franchise Regulation Relaxes Certain Requirements
by Lia Alizia, Norma Mutalib, Reagan Roy Teguh, Mira Ayu Lestari
Published: October, 2019
Submission: November, 2019
Franchising has become one of the most prominent business models in recent years, particularly in sectors such as food & beverage (F&B), education, fashion and modern lifestyle. The Indonesian franchise regime began in 1997, but has changed several times since then, the latest being under Minister of Trade Regulation No. 53/M-DAG/PER/8/2012 on the Implementation of Franchises as amended by Minister of Trade Regulation No. 57/M-DAG/PER/9/2014 (“Regulation 53”).
Controversy followed the issuance of Regulation 53 and many franchise players raised complaints, mainly with regard to the onerous 80-20 obligation (ie the minimum local component must be 80%), and the limitation on the number of outlets that each franchisee could own in the F&B and modern store business sectors, as set out under Minister of Trade Regulation No. 07/M-DAG/PER/2/2013 on The Development of Partnerships in the Franchising of Food and Beverages Services Business Activities and Minister of Trade Regulation No. 68/M-DAG/PER/10/2012 on Modern Store Franchising.
A new franchise regulation was issued on 3 September 2019 and came into force on 4 September 2019. Minister of Trade Regulation No. 71 of 2019 on the Implementation of Franchises (“Regulation 71”), which was introduced with the intention of simplifying the registration process and to facilitating investors has replaced all of the previous ministerial-level franchise regulations referred to above, as well as Regulation No. 60/M-DAG/ PER/9/2013 on The Obligation to Use a Franchise Logo.
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