{"id":4235,"date":"2023-08-21T01:49:38","date_gmt":"2023-08-21T01:49:38","guid":{"rendered":"https:\/\/affa.co.id\/global\/?p=4235"},"modified":"2023-08-23T06:14:38","modified_gmt":"2023-08-23T06:14:38","slug":"similar-but-not-the-same-the-difference-between-franchising-and-licensing-in-indonesia","status":"publish","type":"post","link":"https:\/\/affa.co.id\/global\/2023\/08\/21\/similar-but-not-the-same-the-difference-between-franchising-and-licensing-in-indonesia\/","title":{"rendered":"Similar But Not The Same – The Difference Between Franchising and Licensing in Indonesia"},"content":{"rendered":"

Franchising and Licensing are two popular business models that allow businesses to expand their reach and grow their profits without investing heavily in new infrastructure or resources. However, there are some critical differences between the two models, both in terms of how they work and how they are regulated by Indonesian law.<\/span><\/p>\n

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In a Franchise arrangement, the <\/span>Franchisor <\/b>grants the Franchisee the right to use its Brand, Trademarks, Intellectual Property, and Business Model in return for a fee. The <\/span>Franchisee<\/b> is then responsible for operating the business by the Franchisor’s standards. In a Licensing arrangement, the <\/span>Licensor <\/b>grants the <\/span>Licensee <\/b>the right to use its Intellectual Property (e.g., Trademarks, Patents, Industrial Designs, and Copyrights) in exchange for a fee and for a certain period. The Licensee is then responsible for developing and marketing its own business using the licensed Intellectual Property.<\/span><\/p>\n

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The Indonesian government regulates franchises through the <\/span>Government Regulation No. 42 of 2007<\/b>. This regulation sets out the requirements for Franchisors and Franchisees, including registering the franchise with the <\/span>Ministry of Trade.<\/b> The law also establishes restrictions on franchise arrangements, such as the requirement for franchisors to provide franchisees with specific information about the franchise business.<\/span><\/p>\n

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The legal basis governing franchising and licensing also differs. Franchise activities are regulated through <\/span>Government Regulation No. 42 of 2007<\/b>, strengthened by the <\/span>Minister of Trade Regulation No. 71 of 2019<\/b>. This regulation regulates the requirements for Franchisors and Franchisees, including regulations governing the registration of franchises with the <\/span>Ministry of Trade<\/b>, as well as specific information about the franchise business that must be provided from the Franchisor to the Franchisee.<\/span><\/p>\n

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In addition to the two legal bases above, other legal grounds related to franchising arrangements are <\/span>Law No. 5 of 1999<\/b>, concerning the <\/span>Prohibition of Monopolistic Practices and Unfair Business Competition<\/b>; <\/span>Law No. 40 of 2007<\/b>, concerning <\/span>Limited Liability Companies<\/b> and Franchise Agreements<\/b> that bind the party.<\/span><\/p>\n

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Meanwhile, licenses more closely related to Intellectual Property are governed by <\/span>Government Regulation No. 36 of 2018<\/b> concerning<\/span> the Recordation of Intellectual Property License Agreements<\/b>, which are derivatives of <\/span>Article 41 paragraph (1) of Law Number 20 of 2016<\/b> concerning<\/span> Trademark and Geographical Indications<\/b>.\u00a0<\/span><\/p>\n

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Now let’s dive into the terms of Franchising and Licensing:<\/span><\/p>\n

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FRANCHISE REQUIREMENTS<\/b><\/h4>\n

By law, to conduct a franchise business in Indonesia the Franchisor will need to obtain the Franchisor’s STPW (permit registration) and Commitment Registration to the Ministry of Trade by registering the Franchise proposal documents and agreement draft. The Franchisee will need to do the same thing to obtain Franchisee’s STPW permit and Commitment Registration.<\/span><\/p>\n

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Required documents for Registration of Prospectus (Franchisor’s permits) of the Offered Franchise (to be filed by the Franchisor, notarized, and attested by the Indonesian Embassy) are as follows:<\/span><\/p>\n