Overview of Indonesia's Franchise Registration System – Focusing on Government Regulation No. 35 of 2024 (PP 35/2024)

To operate a franchise business in Indonesia, one must go through a registration process overseen by the Ministry of Trade. Government Regulation No. 35 of 2024 ("PP 35/2024") is a complete revision of the previous Government Regulation No. 42 of 2007, clarifying the principle that each party must obtain an STPW (Surat Tanda Pendaftaran Waralaba, Franchise Registration Certificate) before starting a franchise business.
It is especially important to note that the obligation to acquire STPW is not a single obligation jointly borne by the franchisor and franchisee, but is an obligation imposed independently on each party. The franchisor's registration does not replace the registration that the franchisor must separately obtain, and vice versa.
1. Prerequisites for Franchise Business
Before a franchisor offers their business as a franchise, the business must meet certain qualification requirements. Generally, the existence of a documented business system, stable operational performance and financial soundness over a certain period, registration or listing of related intellectual property rights, and the ability to continuously support franchisees are key judgment factors. In particular, regarding intellectual property requirements, unlike previous regulations, registration or inscription procedures are only recognized when they are met, and merely being in the process of application or application is not sufficient. Considering that trademark registration in Indonesia can take a considerable time, this must be commenced well ahead of the business commencement schedule. However, the specific criteria for meeting each requirement and exceptions (such as relaxed regulations depending on business scale) may vary depending on the facts of each case, so detailed review is necessary from the planning stage of new entry.
2. Franchisee acquiring STPW
All franchisees, including the second-tier franchisor (Advanced Franchisor) authorized by headquarters to designate local franchisees, must acquire STPW before entering into a franchise agreement with a prospective franchisee. Applications are made through the Online Single Channel System (OSS System), and submission of a Franchise Offering Prospectus is required, including the franchisor's business status, financial status, and intellectual property registration. Meanwhile, unlike previous regulations, STPW does not limit its validity period to five years, and as long as the business continues and the underlying intellectual property rights are protected, its validity will continue, making it positively evaluated from the perspective of long-term stability of the business. However, STPWs already issued under the previous regulations are only valid until the originally granted validity period according to the supplementary provisions.
3. Additional requirements for overseas franchisors
For franchisors located overseas, additional procedures such as legalization of documents in their home country and confirmation of business continuity must be completed before applying for STPW. Depending on whether the relevant country is a party to the Apostille Convention, the procedures may vary, and the practical process can be considerable, so it is necessary to prepare well in advance.
4. Acquisition of STPW by Franchisees
The franchisee must also acquire their own STPW separately before starting business, which is a follow-up procedure that distinguishes the franchise contract conclusion. For franchises introduced from overseas, it is essential to confirm that the franchisor's STPW is valid, so it is important in practice to check the registration status of the contracting party in advance.
5. Franchise Agreement
The franchise agreement must include the mandatory requirements required by PP35/2024 and include the rights and obligations of the parties, protection of intellectual property rights, contract period and termination, payment of consideration, dispute resolution, and many other legally required matters. Since the format and contents of the contract are closely tied to the registration process, it is necessary to keep registration requirements in mind from the draft stage.
6. Effects of Non-compliance
Operating a business without a valid STPW or using related terms may result in progressive administrative sanctions, and separately violating relevant laws may result in additional legal liabilities.
Conclusion
In this way, PP 35/2024 imposes very strict requirements throughout the entire process from the commencement of a franchise relationship to contract, registration, and post-management, and in actual applications, interpretations and procedures often differ depending on the type of business or entry method. Therefore, for companies entering the Indonesian market as franchises or already operating business, it is desirable to regard the registration process not as a formal stage where commercial terms are finalized, but as a matter that could affect the overall schedule and structure of the transaction, and to conduct individual legal reviews based on specific facts in advance.