Franchise Business Legality Guide for Partners

Franchising is one of the fastest-growing business models in Indonesia, attracting both local entrepreneurs and international investors. It offers a proven business concept, established branding, and operational support—all of which make it an appealing choice for those who want to minimize startup risks.

However, before entering into any franchise agreement, both the franchisor (the brand owner) and franchisee (the business partner) must comply with Indonesia’s franchise regulations. The government has set specific legal frameworks to protect both parties and ensure that franchise operations are conducted transparently, ethically, and in accordance with the law.

This article provides a comprehensive guide to franchise business legality in Indonesia—covering the legal definition, regulations, required documents, and steps to register a franchise license for a compliant and trustworthy partnership.

What Is a Franchise?

A franchise is a business model where the franchisor grants the franchisee the right to use its brand, system, and business concept in exchange for fees and adherence to specific operational standards.

In Indonesia, franchise businesses are regulated under:

• Government Regulation (PP) No. 42 of 2007 on Franchising 
• Minister of Trade Regulation (Permendag) No. 71 of 2019 on the Implementation of Franchises 

According to these laws, a franchise must fulfill several legal criteria:

1. The business concept must be proven successful. 
2. It must have a unique business characteristic that distinguishes it from competitors. 
3. The franchisor must provide ongoing support to the franchisee. 
4. The franchise relationship must be based on a written agreement. 

Legal Framework for Franchising in Indonesia

To ensure fairness and legal protection, Indonesia requires both franchisors and franchisees to register their business and obtain franchise registration certificates from the Ministry of Trade.

For Franchisors (Domestic or Foreign):

They must register their franchise offering by obtaining an STPW (Surat Tanda Pendaftaran Waralaba) — a Franchise Registration Certificate.

For Franchisees (Business Partners):

They must also obtain an STPW for Franchisee Registration to legally operate the business using the franchisor’s brand and system.

Without these certificates, the franchise cannot legally operate in Indonesia and may face administrative sanctions.

Franchise Agreement Terms

A franchise agreement (Perjanjian Waralaba) is the legal contract that defines the relationship between the franchisor and the franchisee. It must be written in Bahasa Indonesia and legalized by a notary public.

According to Article 5 of PP No. 42/2007, the agreement must include the following:

1. Identities of both parties (franchisor and franchisee) 
2. Intellectual property rights being licensed (trademark, logo, trade secret) 
3. Business operational methods and standardization 
4. Rights and obligations of each party 
5. Franchise fee and royalty terms
6. Duration and renewal terms
7. Territorial rights (exclusive or non-exclusive) 
8. Training and assistance provided by franchisor
9. Dispute resolution mechanisms
10. Termination conditions

This agreement serves as the main legal foundation of the partnership and must be registered with the Ministry of Trade to obtain the franchise certificate.

Required Documents for Franchise Registration

To legally register a franchise in Indonesia, both franchisors and franchisees must prepare the following documents:

A. For Franchisors (Brand Owners):

1. Company Deed and Business License (NIB)
2. Franchise Prospectus (Dokumen Penawaran Waralaba) – outlining business profile, management, financial performance, and franchise system 
3. Franchise Agreement Draft
4. Intellectual Property Certificates (Trademark, logo, copyright, or patent) 
5. Operational Manual and Training Guidelines
6. Business Financial Statements (minimum 2 years)
7. BPOM or Halal Certificate (for F&B sectors) 
8. Proof of business success and outlets operating in Indonesia or abroad

B. For Franchisees (Partners):

1. Copy of Franchise Agreement signed with the franchisor
2. Company Legal Documents (Akta, SK Kemenkumham, NIB)
3. Tax ID (NPWP)
4. Store or business location permit
5. Proof of franchise fee payment
6. Training completion documents from franchisor

All documents must be submitted through the OSS system or directly to the Ministry of Trade’s Directorate of Business Development.

Registration Steps for Franchise Legality

Here’s how to register a franchise in Indonesia step by step:

Step 1: Prepare the Franchise Prospectus

The franchisor must create a detailed Franchise Prospectus containing the company profile, franchise system, financial performance, operational model, and intellectual property proof. This document demonstrates the credibility of the business.

Step 2: Draft and Sign the Franchise Agreement

Both parties must prepare a franchise agreement in Bahasa Indonesia, signed and notarized. The agreement must comply with the mandatory clauses stated in PP No. 42/2007.

Step 3: Submit the Application through OSS

Both franchisor and franchisee can register through the Online Single Submission (OSS) portal by uploading all required documents.

Step 4: Verification by the Ministry of Trade

The Ministry of Trade will review the documents, verify the intellectual property rights, and ensure the business meets the requirements.

Step 5: Obtain STPW (Franchise Registration Certificate)

Once approved, the Ministry will issue the STPW, which serves as proof that your franchise is officially registered and legally recognized.

Duration and Validity

The STPW certificate is valid as long as the franchise agreement remains in force. If the agreement is renewed or amended, both parties must re-register or update the information with the Ministry of Trade.

Failure to renew the STPW can result in penalties or revocation of the franchise’s operational legality.

Common Mistakes in Franchise Legalization

Many entrepreneurs and franchisors make avoidable mistakes when managing franchise legality in Indonesia. The most frequent issues include:

1. Unregistered franchise agreements that are not submitted to the Ministry of Trade. 
2. Incomplete franchise prospectus lacking financial data or IP documentation. 
3. Using foreign-language agreements without a Bahasa Indonesia version. 
4. Failure to renew franchise certificates upon expiration. 
5. Operating without an NIB or tax registration.

To prevent these errors, it’s recommended to work with a professional legal consultant like Korsia Group, who specializes in franchise registration and compliance.

Benefits of Legalizing a Franchise

Proper franchise registration brings several tangible benefits to both franchisors and franchisees:

• Legal protection under Indonesian trade law. 
• Higher business credibility for investors, suppliers, and banks. 
• Compliance with Ministry of Trade regulations, avoiding fines or shutdowns. 
• Ease of expansion, as legal franchises are eligible for multi-outlet licensing. 
• Consumer trust, as customers prefer businesses operating transparently. 

The Role of Korsia Group in Franchise Legalization

As a trusted business licensing and legal consulting firm, Korsia Group provides end-to-end support for entrepreneurs and investors who wish to establish franchise businesses in Indonesia.

Our services include:

• Drafting and reviewing Franchise Agreements and Prospectus. 
• Preparing and submitting documents to the Ministry of Trade. 
• Registering for NIB and other business licenses via OSS. 
• Consulting on intellectual property protection (trademark registration). 
• Legal assistance for contract renewal or dispute resolution. 

With Korsia Group, your franchise registration process becomes faster, compliant, and fully transparent, ensuring your brand operates legally and gains maximum credibility in the Indonesian market.

Conclusion

Franchising offers great potential in Indonesia’s dynamic economy, but legal compliance is essential to ensure long-term success. Understanding and following the correct procedures—such as obtaining an STPW certificate, registering your NIB, and drafting a proper franchise agreement—are crucial steps in protecting your investment.

By partnering with Korsia Group, franchisors and franchisees can confidently navigate Indonesia’s complex regulatory landscape with ease. Our expertise ensures that every document, permit, and registration aligns perfectly with Indonesian trade laws.

A successful franchise begins not just with a great brand—but with strong legal foundations that protect both business and trust.