The Government of the Republic of Indonesia has officially issued Government Regulation Number 35 of 2024 concerning Franchising (“GR 35/2024”), which has come into effect on September 2, 2024. This regulation officially revokes and declares Government Regulation Number 42 of 2007 concerning Franchising (“GR 42/2007”) as no longer applicable. GR 35/2024 was issued to achieve fair business practices, legal certainty, and business partnerships between franchisors and franchisees. Thus, what are the significant differences between GR 42/2007 and GR 35/2024?
- Franchise Organizers
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GR 42/2007 |
GR 35/2024 |
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Article 1 paragraph (2) and (3) of GR 42/2007 Franchise organizers consist of the Franchisor and the Franchisee.
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Article 3 of GR 35/2024
Franchise organizers are divided into 8 (eight) categories, which consist of:
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- Franchise Criteria
In summary, the significant differences in the franchise criteria between GR 42/2007 and GR 35/2024 are that under GR 35/2024, a franchise must meet certain criteria, including having a business system in place, the business is profitable, possessing registered or recorded intellectual property, and providing continuous support from the Franchisor to the Franchisee.
- Franchise Logo
A new provision that was previously not regulated in GR 42/2007 relates to the regulation of the Franchise Logo. Based on Article 21, Article 22, Article 23, Article 24, and Article 25 of GR 35/2024, Franchise Organizers are obliged to use the Franchise Logo, which must be displayed in a visible and accessible location.
- Franchise Registration Certificate (Surat Tanda Pendaftaran Waralaba / STPW)
STPW is a business permit that supports business activities and serves as proof that an individual or business entity has been officially registered as a Franchise Organizer. Based on Article 12 paragraph (5) and (6) of GR 42/2007, the validity period of the STPW is 5 (five) years, and can be extended for a period of 5 (five) years in the event that the Franchise Agreement has not yet expired.
On the other hand, according to the changes in GR 35/2024, the current provisions are as follows:
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STPW for Franchisors |
STPW for Franchisee |
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Article 16 paragraph (1) and paragraph (2) of GR 35/2024
STPW for Franchisors is declared invalid if:
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Article 16 paragraph (3) and paragraph (4) of GR 35/2024
STPW for Franchisee is declared invalid if:
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Thus, with the current changes in GR 35/2024, STPW no longer has a validity period. However, provision regarding its invalidity refers to Article 16 as mentioned above. There are also new regulations regarding the application for the STPW which has been updated to reflect and adapt to current practices. Previously, under Article 12 of GR 42/2007, applications were submitted to and issued by the Minister. Now, under GR 35/2024, the provisions are as follows:
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Application of STPW for Franchisors |
Application of STPW for Franchisees |
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According to Article 14 paragraph (1) of GR 35/2024, applications of STPW for Franchisors/Franchisees must be submitted through Online Single Submission (OSS). |
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Article 15 paragraph (2) GR 35/2024 STPW for Franchisors is issued by the OSS on behalf of the Minister.
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Article 15 paragraph (3) GR 35/2024 STPW for Franchisees is issued by the OSS on behalf of the Governor of the Special Capital Region of Jakarta / regent / mayor, or the Head of the Nusantara Capital Authority. |
The regulatory changes related to the application for the STPW by utilizing the OSS system reflects that the application process is streamlined and more accessible, showcasing the modernization of business licensing procedures.
- Mandatory Reporting
A new provision introduced in GR 35/2024 is the mandatory reporting system, which was not regulated in GR 42/2007. Mandatory reporting under Article 28 paragraph (3) of GR 35/2024 regulates several specific details that must be reported. According to Article 28, Paragraph (4) of GR 35/2024, the report must be submitted annually, no later than June 30 of the following year.
- Emphasis on the Use of Domestic Goods and Services
Referring to Article 26 paragraph (1) of GR 35/2024, Franchisors and Advanced Franchisors are required to prioritize the use of domestically produced goods and/or services. Franchisors and Advanced Franchisors are expected to collaborate with local MSME actors as suppliers of goods and/or services.
- Sanctions
Another significant difference is seen in the sanctions’ regulations under GR 35/2024, which are far more comprehensive and detailed compared to GR 42/2007. In essence, GR42/2007 outlines administrative sanctions that can include written warnings, fines, and/or the revocation of the STPW (carried out by the Minister, Governor, or Regent/Mayor according to their respective authorities), with specific provisions as follows:
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GR 42/2007 |
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No. |
Article |
Provisions |
Sanctions |
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1. |
Article 8 GR 42/2007 |
Provision of continuous support in the form of training, operational management guidance, marketing, and research and development to the Franchisee. |
If Article 8 GR 42/2007 is violated, a written warning or worse revocation of STPW might be imposed. |
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2. |
Article 10 GR 42/2007 |
Registration of the franchise offering prospectus before entering into a Franchise Agreement with the Franchisee. |
Written warnings will be issued within a period of 2 (two) weeks, followed by a monetary fine of up to Rp 100,000,000 (one hundred million Rupiah). |
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3. |
Article 11 GR 42/2007 |
The Franchisee (or their authorized representative) is required to register the Franchise Agreement. |
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On the other hand, GR 35/2024 outlines administrative sanctions including written warnings, temporary suspension of business activities, and/or revocation of the STPW (carried out by the Minister or the Governor of the Nusantara Capital Region according to their authority), with specific provisions as follows:
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GR 35/2024 |
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No. |
Article |
Provisions |
Sanctions |
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1. |
Article 7 paragraph (1) letter b GR 35/2024 |
Requirement to provide continuous support to Franchisees and Advanced Franchisees. |
Administrative sanctions include written warnings, temporary suspension of business activities, and/or revocation of the STPW. |
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2. |
Article 12 GR 35/2024 |
Obligation to have STPW as a business license to support their business activities. |
The sanctions will refer to the regulations in the field of risk-based business licensing. |
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3. |
Article 13 paragraph (1) GR 35/2024 |
Requirement to have STPW before entering into a Franchise Agreement. |
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4. |
Article 14 paragraph (1) GR 35/2024 |
Franchisees or Advanced Franchisees are required to have STPW before commencing their business operations. |
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5. |
Article 18 GR 35/2024 |
Requirement to update their STPW through the OSS system whenever there are changes in the franchise offering Prospectus and the Franchise Agreement. |
Administrative sanctions will be imposed, including written warnings, temporary suspension of business activities, and/or revocation of the STPW. |
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6. |
Article 21 paragraph (1) GR 35/2024 |
Obligation to use the Franchise Logo. |
Administrative sanctions will be imposed, including written warnings, temporary suspension of business activities, and/or revocation of the STPW. |
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7. |
Article 28 paragraph (1) and (2) GR 35/2024 |
Be submitted annually by June 30 of the following year at the latest. |
Administrative sanctions will be imposed, including written warnings, temporary suspension of business activities, and/or revocation of the STPW. |
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8. |
Article 29 paragraph (1) and (2) GR 35/2024 |
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9. |
Article 37 GR 35/2024 |
Prohibition from using the term and/or name of the Franchise for their names and/or business activities if they do not have an STPW. |
The sanctions will refer to the regulations in the field of risk-based business licensing and does not exempt from criminal liability in accordance with applicable laws and regulations. |
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10. |
Article 38 GR 35/2024 |
Prohibition from using and/or misusing the franchise logo without authorization. |
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In conclusion, GR 35/2024 introduces significant changes to the regulation of franchising, aiming to enhance Business Fairness.
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