Franchise License Agreement Template for Indonesia

A Franchise License Agreement is a comprehensive legal contract that establishes the business relationship between a franchisor and franchisee in Indonesia. Under Indonesian law, specifically Government Regulation No. 42 of 2007 on Franchising, this agreement must meet strict regulatory requirements including franchise registration (STPW), local content provisions, and mandatory use of the Indonesian language. You need this document to legally expand your business through franchising or to acquire franchise rights while ensuring full compliance with Indonesian franchise regulations.

When do you need this document?

You require a Franchise License Agreement when establishing any franchise business relationship in Indonesia. This includes situations where you are expanding an existing business through franchising, acquiring franchise rights from an international brand entering the Indonesian market, or transferring franchise operations between parties. The document is mandatory before commencing franchise operations, as Indonesian law requires all franchise agreements to be registered with the Ministry of Trade through the STPW (Surat Tanda Pendaftaran Waralaba) system. You also need this agreement when renewing existing franchise relationships or modifying the terms of current franchise operations.

Key legal considerations

Your Franchise License Agreement must address several critical legal elements to ensure enforceability and compliance. The grant of franchise rights section should clearly define the scope of rights transferred, including territorial exclusivity and permitted business activities. Intellectual property provisions must detail trademark usage rights, trade secret protection, and compliance with Law No. 20 of 2016 on Marks and Geographical Indications. Fee structures including initial franchise fees, ongoing royalties, and marketing contributions must be clearly specified. The agreement should include comprehensive operational standards, quality control requirements, and performance benchmarks. Termination clauses must outline grounds for termination, notice periods, and post-termination obligations including non-compete restrictions and return of confidential information.

Legal requirements in Indonesia

Indonesian franchise law imposes specific mandatory requirements that your agreement must incorporate. Government Regulation No. 42 of 2007 requires all franchise agreements to include provisions for local content development, technology transfer, and skills training for Indonesian nationals. The agreement must be written in Indonesian language as the primary version, though bilingual versions are permitted. You must obtain STPW registration from the Ministry of Trade before commencing operations, which requires submission of the signed franchise agreement along with supporting documentation. Minister of Trade Regulation No. 71 of 2019 mandates specific disclosure requirements, including detailed business information, financial statements, and franchise system documentation. The agreement must comply with Indonesian Civil Code provisions regarding contract formation and validity, ensuring all parties have legal capacity to enter binding agreements. Additionally, if the franchise involves international parties, currency regulations under Bank Indonesia policies may apply to fee payments and financial transfers.