Franchising is popular in Indonesia. Historically many sectors had market entry restrictions, so many companies preferred not to invest in the pre 1998 Soeharto era, as Indonesia was a rather unknown market. All that changed in recent years, even though investment in Indonesia is still a difficult process compared to more modern economies.
Article 20 requires the Franchiser to "cooperate" with small and medium enterprises "as franchisees and/or suppliers".
The franchiser and franchisee will need to file reports annually including as to its sourcing.
There are restrictions on terminations.
It is unclear if arbitration is an option.
Display of a new 'Certified Franchise' logo from the Trade Services Offices.
Another rule hit the newspapers this week. This specifies that master franchisees are limited to 250 outlets. The government's new Decree 7/2013 includes an aim to diversify ownership by putting a cap on owned outlets. KFC's business of 440 outlets and growing will be challenged by this if they are required to divest a large number of them. The government is hoping that this will ensure more owners will have equity in these operations, that it will boost small business ownership. But the industry points out that forcing divestment is pointless since few SMEs will be able to acquire substantial equity ownership of many quite valuable franchise operations.