Recognize How to Create a Franchise and Procedures

Franchise or franchise businesses are currently increasingly popular and mushrooming in Indonesia.
Not a few then flocked to open a franchise because they considered that there were bright prospects in this business field.
But to open a franchise business, there are legalities that need to be considered.
What are the legalities in question?
Contract Law will explain it below.

Overview of Franchise

Franchise is a special right owned by an individual or business entity to a business system with business characteristics in order to market goods and/or services that have proven successful and can be utilized and/or used by other parties based on a Franchise Agreement.
So in principle, in a franchise business a person or business entity (franchisor or further franchisor) can grant the right to use or utilize their Intellectual Property Rights (IPR) or business characteristics to other parties (franchisees or further franchisees).
The granting of this right is accompanied by compensation in the form of royalties and other conditions which must then be set out in the Franchise Agreement.

Franchise Agreement

Franchise Agreement in the legality of business establishment
franchise is the most important thing and is prioritized by entrepreneurs and even before any other license is applied for.
According to Permendagri No. 71/2019, the franchise agreement must at least contain :

The names and addresses of the parties entering into the franchise agreement.
Type of Intellectual Property Rights, i.e. the type of IPR of the franchisor, such as the company’s brand and logo, design of outlets/business premises, management or marketing systems or franchised seasoning mixes.
The business activity that is agreed upon.
Rights and obligations of the parties which include:
- Franchisor: the right to receive fees or royalties and the obligation to provide ongoing guidance.
- Franchisee: the right to use the IPR or Business Characteristics owned by the Franchisor and the obligation to maintain the code of ethics/confidentiality of the IPR or Business Characteristics provided by the Franchisor.

Assistance, facilities, operational guidance, training, and marketing provided by the franchisor or follow-on franchisor.
Business area, which is the area limit given by the franchisor or advanced franchisor to the franchisee or advanced franchisee to develop the franchise business such as the Sumatra, Java and Bali regions or throughout Indonesia.
The term of the agreement, which is the limitation of the start and end of the franchise agreement from the time the agreement letter is signed by the parties.
The procedure for payment of fees, including the timing and calculation of the amount of fees, such as fees or royalties.
Ownership, change of ownership, and rights of heirs in case of change of ownership due to transfer of ownership of the franchise or death of the franchisor.
Dispute resolution.
Procedures for extension and termination of the agreement.
A guarantee from the franchisor or continuing franchisor to continue to carry out its obligations in accordance with the contents of the agreement until the term of the franchise agreement ends.
The number of outlets/business premises to be managed by the franchisee or continuing franchisee within the term of the franchise agreement.

The above franchise agreement must also be registered by the business actor to the Ministry of Trade through OSS.
If Sobat KH plans to open a franchise business or wants to make a Franchise Agreement but is still confused or afraid of mistakes, Kontrak Hukum can help Sobat KH to make and review Sobat KH’s Franchise Agreement.
Sobat KH does not need to worry about using services at Kontrak Hukum because Kontrak Hukum has been trusted in solving legal problems.

Franchise Registration Certificate (STPW)

Apart from the Franchise Agreement, another legality that franchise business actors need to pay attention to is the Franchise Registration Certificate (STPW).
This STPW applies as a franchisee’s business license to run its business.
STPW can be submitted through OSS on the OSS Institution – BKPM | Electronically Integrated Business Licensing Services page. READ ALSO: 5 Most Promising Non-Food Franchise Business Ideas, Dare to Try? If the parties or franchise organizers do not carry out the obligation to make STPW, business actors can be subject to sanctions in the form of revocation of business licenses to operational / commercial licenses.

KH Contact

Well, KH Friend, that’s the legality that needs to be considered when KH Friend wants to open a franchise business.
For KH Pals who want to ask or consult about the legality of the franchise business or other legal issues, don’t hesitate to contact the Legal Contract at the Ask KH link.