Sundry of Franchise Business License Registration
“A franchisee must have legality. One of the forms is the Franchise Registration Letter (STPW).”
Over time, the franchise business or also known as the franchise is increasingly being favored by the public.
This popularity is also because franchising is a type of partnership aimed at micro, small and medium enterprises (MSMEs).
If referring to Government Regulation Number 42 of 2007 concerning Franchising (PP Number 42 of 2007), the franchise is a special right owned by an individual or business entity to a business system with business characteristics in the context of marketing goods and/or services that have been proven and can be used utilized and/or used by other parties based on the franchise agreement.
In simple terms, an individual or a business entity that is not the founder can participate in constructing buildings and products by the characteristics of the company that is the object of the franchise concerned.
Franchise organizers
Furthermore, several parties become franchise organizers. This is stated in the Regulation of Trade Ministry of Trade Number 71 of 2019 concerning the Implementation of Franchising (Permendag Number 71 of 2019), including:
- The franchisor, namely an individual or business entity gives the right to utilize/use its franchise to the franchisee.
- Franchisee, namely an individual or business entity that is granted the right by the franchisor to utilize/use the franchise owned by the franchisor.
- The continuing franchisor, namely the franchisee is given the right by the franchisor to appoint a continuation franchisor.
- Continuing franchisors are individuals or business entities that receive rights from further franchisors to utilize/use the franchise.
Of the four franchise operators above, each of them can come from within the country or abroad.
Criteria for companies that can be used as franchise objects (franchisors)
However, it should be noted that not all companies can be used as franchise objects or become franchisors. Various criteria must be met to become a franchisor, including among others (PP Number 42 of 2007):
- Has business characteristics
- Proven to provide benefits
- Have standards for services and goods/services offered which are made in writing
- Easy to teach and apply
- There is continuous support
- Registered Intellectual Property Rights
Advantages of having a franchise business
From the franchisor’s point of view, this business scheme can indirectly make its trademark more well-known in the community. If managed well by the franchisees, of course, the profits received by the franchisor will also increase.
Meanwhile, from the franchisor’s point of view, they benefit because the characteristic of the company that becomes the franchisor has proven to have a good reputation. Therefore, the profit potential is greater than opening a business from the beginning.
In addition, a beginner in the business world does not need to worry about this franchise pattern. Because those who decide to become franchisees will be provided with various pieces of training to run the business.
Well, if you are interested in opening a franchise business, then you need to pay attention to the following things.
Franchise Registration Letter (STPW) as the legality of buying and selling franchises
Referring to the Permendag Number 71 of 2019, one of the main requirements that must be met by franchise operators is to have a Franchise Registration Letter, commonly abbreviated as STPW.
The definition of STPW based on the Minister of Trade Regulation Number 71 of 2019 is proof of registration of a franchise offer prospectus for franchisors and advanced franchisors as well as proof of registration of franchise agreements for franchisees and continued franchisees given after fulfilling the specified registration requirements.
From the definition above, it can be seen that there are two important components of STPW, which include:
- The registered franchise offer prospectus
- Registered franchise agreement
STPW could be managed through the Online Single Submission System (OSS System) owned by the Ministry of Investment/Investment Coordination Agency.
Franchise offer prospectus
A franchise offer prospectus is a written statement from the franchisor, which at least contains (Attachment I of Permendag Number 71 of 2019):
- Advanced franchisor or franchisor identity data
- Franchise business legality
- History of business activities
- The organizational structure of the franchisor or advanced franchisor
- Financial statements for the last two years
- Number of places of business
- List of franchisees or advanced franchisees
- The rights and obligations of the franchisor or continued franchisor and the franchisee or continued franchisee
- Intellectual Property Rights (IPR) of the franchisor, including IPR registration status
If the franchise offer prospectus is written in a foreign language, it must be officially translated into Indonesian.
Then, the party who is obliged to register the franchise offer prospectus is the franchisor or the continuing franchisor.
The franchise offer prospectus should be submitted to the prospective franchisee/prospective franchisee no later than two weeks before the signing of the franchise agreement.
If the franchise offer prospectus is registered by a foreign franchisor, it must be legalized by a Public Notary by attaching a certificate from the Indonesian Trade Attache or the Indonesian Representative Office Official in the country of origin.
Franchise Agreement
The definition of a franchise agreement based on Regulation of the Minister of Trade Number 71 of 2019 is a written agreement made under Indonesian law between a franchisor and a franchisee or a continuing franchisor and a further franchisee. This agreement is the basis for the operation of the franchise between the parties.
The franchise agreement must at least contain the following (Attachment II of the Minister of Trade Regulation Number 71 of 2019):
- Names and addresses of parties
- IPR type
- Business activities
- Rights and obligations of the franchisor/continued franchisor and franchisee/continued franchisee
- coaching
- Business area
- Period
- How to pay rewards
- Ownership, change of ownership, and rights of heirs
- Dispute resolution
- Procedure for extending and terminating a franchise agreement
- Guarantee
- Number of outlets
The franchise agreement is required to be submitted to the franchisee/continued franchisee no later than two weeks before signing the agreement. Furthermore, the franchisee/continued franchisee is obliged to register the Franchise Agreement.
Procedure for applying for STPW
As previously mentioned, to obtain an STPW, the prospectus of a franchise offer and a franchise agreement must be registered first, with the following procedure (Ministry of Trade Regulation Number 71 of 2019):
- The parties must log in to the OSS System first
- Apply STPW through the Online Single Submission (OSS) system on the option of Business Licensing to Support Business Activities (PB UMKU)
- The parties upload the required documents in the form of:
- Franchise offer prospectus (for franchisors and advanced franchisors)
- Franchise Agreement
- The authorized agency will verify the STPW application through OSS access rights in a maximum of five days
- If the document is declared complete and correct, the STPW will be issued
Obligations of the parties
After obtaining the STPW, the franchise operator is obliged to (Permendag Number 71 of 2019):
- Using the franchise logo (except for domestic franchisors)
- The franchisor and the continuing franchisor are required to guide the franchisee and the follow-up franchisee
- The franchisor comes from within the country, the further franchisor comes from abroad, the further franchisor comes from within the country, and the franchisee comes from abroad who has STPW, must submit a report on franchise business activities to the Director of Business Development and Distribution Actors of the Ministry of Trade
Penalty
There are several kinds of penalties that can be imposed on parties who violate the provisions (Module “Socialization of Franchise Registration Certificates (STPW)”, Directorate of Business Development and Distribution Actors of the Ministry of Trade):
- Conducting business activities without a business license:
Maximum imprisonment of 4 years and/or a maximum fine of Rp. 10 billion (Law Number 7 of 2014 concerning Trade) - Not using the franchise logo, not providing guidance, and/or not submitting a Business Activity Report:
Written warning and/or revocation of STPW. (Minister of Trade Regulation No. 71 of 2019) - Not a franchise but using the term franchise:
Recommendation for license revocation (Permendag Number 71 of 2019).
Do you want to have a franchise business, but are still confused about taking care of the legality? Please consult us, Prolegal!
Author: Faiz Azhanzi Yazid
Editor: Bidari Aufa Sinarizqi
Translator: Angelie Kartika Putri