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Starting a Franchise Business in Indonesia

9 min read|Last Updated: September 28, 2022|
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Starting an Indonesian company as a franchise is a relatively safer business model as compared to other types of business entities. The reason is simple – you start off with a reputable and known brand name that millions know about while enjoying the benefits of investing in the populous, vibrant nation of Indonesia.

Indonesia is indeed an ideal nation for franchising business model as there is a huge, young, and digitally savvy population with a growing middle class.

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Franchises in Indonesia

Like all other types of business, franchise businesses in Indonesia still need to go through significant bureaucratic procedures and complex laws that regulate this type of investment. Investing time and finances into running a franchise business in Indonesia as a foreigner is not impossible. Those who choose to do so require proper preparation and knowledge of the various steps to be taken.

In Indonesia, both the franchiser and the franchisee can be either individuals or legal entities and either residents or non-residents (this varies depending on the entity registration and location). Franchisers can rely on sub-franchisers (resident or non-resident) to run their business in a pre-determined location.

Indonesia Incorporation Specialist Eric

What are the Requirements to Set Up a Franchise Business in Indonesia?

The requirements to set-up a franchise in Indonesia are listed below:

  • Both franchisors and franchisees are to obtain a franchise registration certificate or Surat Tanda Pendaftaran Waralaba (STPW). The franchise company is to update the Indonesian authorities which issued the STPW on the progress of their franchise through the submission of a detailed report by March 31 every year.
  • Franchisors and franchisees intending to run their business in Indonesia must ensure that at least 80% of the raw materials, services, and business equipment are locally sourced, i.e. from Indonesia; an assessment team appointed by government authorities made the recommendation that such must be the case.
  • Franchisors must provide a clear business proposition after having registered Intellectual Property Rights and need to abide by the franchise license rules.
  • Franchisors need to possess at least five years of business experience and be able to report on the goods and services used for their business activities.
  • Franchisors need to be able to demonstrate the profitability of the business and provide continuous support to their franchisees.

Franchisors must complete the following tasks:

  • Obtain the STPW franchise registration certificate, which takes approximately three months to be issued and is valid for five years with the possibility of extension
  • Approach the Ministry of Trade and register for the Prospect of Offer, which must be in Indonesian and legalized by a public notary and Indonesian Embassy where the franchisor is located
  • Provide franchising agreement

Franchisees must complete the following task:

A disclosure document, which reveals the franchisor’s ID and company history, the franchisor’s enterprises and organisational structures, a list of all franchisees, and details of both franchisors and franchisees’ rights and obligations, is also required to register a franchise in Indonesia.

Franchisors must present audited balance reports for the previous two years, with the exception of small organisations. A recognised entity must legitimate any disclosure documents received from a foreign franchisor.

What are Franchising Agreements?

Every franchise business in Indonesia is bounded by the stipulations specified in such agreements. Franchisees must then guarantee that they will follow all of the operational directions specified in the franchising agreement. Franchisors typically provide training, guidance, and assistance to franchisees.

  • All franchising agreements in Indonesia mention the fees and royalties to be received by the franchisor.
  • They will also stipulate the rights of the franchisee regarding the use and manufacture of certain objects which may have been patented, copyrighted, or service marked. These objects are to be used to identify the enterprise in question.
  • They typically specify operational directions to be followed by the franchisee.

Alternatives to Franchising in Indonesia

While franchising can be a lucrative business model, some may prefer to set up their own company as a form of full ownership tied to that particular brand. For those who are interested in creating a new brand from scratch, you can opt for a local PT or a PT PMA company. These are the two most common types of business entities in Indonesia.

Incorporating a company in Indonesia, be it local PT or PT PMA company, has their own set of advantages and disadvantages. It is recommended that you understand more about each business type before incorporation.

Requirements to Setup a Company in Indonesia

If the franchise business model is not for you, consider the Local PT and PT PMA routes like mentioned above. You can find the basic requirements below for each entity type.

Local PT Company Requirements

  • 2 local shareholders

  • 1 director
  • 1 commission
  • Able to meet the minimum projected investment value, depending on the scale of your business

    • Small-scale business: IDR 50 million
    • Medium-scale business: IDR 500 million
    • Large-scale business: more than IDR 10 billion
  • Registered business address (virtual office is allowed)
Indonesia Incorporation Specialist Eric

PT PMA Company Requirements

  • 2 local shareholders

  • 1 director
  • 1 commissioner
  • Min. value of investment plan for each business activity is IDR 10 billion
  • Local registered address in a commercial building

KICKSTART YOUR COMPANY REGISTRATION FOR YOUR FRANCHISE BUSINESS IN INDONESIA TODAY

Come down to our office or get in touch virtually to get an incorporation assessment and insights to your industry in Indonesia.

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FAQs

How do you become a franchise owner with no money?2021-11-01T13:00:41+08:00

It’s not possible to start a franchise without any money. You’ll need to pay an initial franchise fee, and you will have other start-up costs. Furthermore, franchisors want to see that you have some skin in the game in the form of a down payment. 

Do franchise owners have to work?2021-11-01T13:00:01+08:00

There are a variety of places a franchise owner can work, depending on the type of franchise they own. Some franchise owners choose to take an active role, and will work alongside their employees, while at the same time managing the business. 

Is opening a franchise a good investment?2021-11-01T12:59:29+08:00

If you want to own a business, but don’t have an idea to build from scratch and you have the resources to make it work, a franchise can be a good choice. Make sure you are prepared to pay the costs associated with the franchise and that the corporate headquarters is likely to provide the support you need. 

How much money do you need to start a franchise store?2021-11-01T12:58:40+08:00

Franchise fees generally run in the $20,000 to $30,000 range, though they can top $100,000 for higher-end, more established brands. 

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Join the discussions

  1. Shashank October 21, 2020 at 12:25 pm - Reply

    I am interested to start small business in Indonesia bali

    • Tiwi November 2, 2020 at 9:34 am

      Hi Shashank,
      We are sorry we cannot assist you to set up your business in Bali. We are happy to assist you to set up your business only in Jakarta area as our registered office address is located in Jakarta.
      Please contact us via Paul Hype Page to discuss further.
      Thank you.

  2. Perry Dominguez November 2, 2019 at 8:10 am - Reply

    I’m planning company in the Philippines wanting to partner via a master franchise, joint venture or licensing agreement in Surabaya in Indonesia. I plan to distribute soft ice cream in Lawson, Alfamart and 7-11 stores in Surabaya.

    • tiwiyah tiwiyah November 7, 2019 at 9:49 am

      Hello Perry,

      It is possible to established a foreign-owned company, also known as a PMA, in Indonesia through a joint venture with an Indonesian partner. If you would like to do so, we provide services which will enable you to establish a PMA in Indonesia.

      You may contact us to receive further information on our services related to this matter.

      Thank you.
      Paul