Written by: Iman Sjahputra

Franchise business is getting more popular in Indonesia. Most of this business is brought by the foreign investor and run by the local businessmen. Almost in all of the malls, supermarkets, hypermarkets and other strategic locations we could see franchise of the international trademarks are all over stands at the food courts. Sometimes it is even hard to be pronounced by Indonesian tongue. For food and beverages industries we familiar with trademarks which become the kings in the franchise world of Indonesia such as Mc Donald’s, Kentucky Fried Chicken (KFC), Popeye, Pizza Hut, Dunkin Donut, Bread Talk, Coca Cola, Seven Up, Pepsi Cola and many more. All of these trademarks are the worldwide trademarks and up until today still exist in Indonesia.

For the businessmen the franchise business model can be regarded as a safe and promising business. Why is that? It is because the franchisor has provided the franchisee with the management, skill, development concept, until the strategic location appointment so the franchisee (businessmen) will be headache-proof. But it cannot be ignored that the financial capabilities of the businessman (franchisee) is the most fundamental element in this business.

McDonald’s, Kentucky Fried Chicken and Pizza Hut regularly conducting the franchise business model to develop its business and in fact there are many businessmen are joining in this franchise business model.

Beside the above franchise business model, there is a distribution product franchise model. Under this business model then the franchisee is obligated to sell and manage the products produced by the franchisor only for an example the Petrol Filling Station. The petrol station business widely spread in Indonesia now is not monopolized by Pertamina only, but there are also Petronas from Malaysia and Shell from America that starting to increase in Indonesia. In the petrol station business, the franchisor supplies the petrol to the franchisee’s petrol station and the marketing duty will be the franchisee’s responsibility.

Different from the both models mentioned above is franchise trademark model. In this franchise model the franchisee is given the right to produce the products under the franchisor trademark/logo. For example the products such as accessories, dolls, garments, jeans, ladies and traveling bags. One example we could mention Mattel Incorporation of the United States gives permission to an Indonesian franchisee to produce “Barbie” dolls and using the American’s doll characters.

Aside from the franchise models as above, Indonesia in fact does not have any appropriate regulation in the field. Usually the franchisor and franchisee regulates their rights and duties in the form or agreement. It means that the rights and duties of the parties are limited only to the rights and duties as mentioned in the agreement. So the objects of the franchise such as the scope/region, marketing target, royalty, advertisement, management fee, “know how” duties of the franchisor to the franchisee, training of the human resources and the term of franchise do not necessarily to be legalized or intervened by the authority/government.

Consequently one party will be in the weaker position and in practice usually the franchisor’s position is higher than the franchisee. It happens because usually the franchisor, who usually the foreigners, are the party who transfers technologies, managements and skills to the franchisee. Therefore it is not surprising that the agreement is often does not equal in the arrangement of the rights and duties of the parties. It is almost impossible for the franchisee to refuse the requirements offered by the franchisor. Hence legally every agreement should consist of equal aspect where in an agreement it is not permissible that one party is in the weaker position that the other party.

That is the reason why Indonesia should have a franchise regulation. Although in fact Indonesia already had the Industrial and Trade Minister Decree No. 259/MPP/Kep/7/1977. This regulation is not sufficient enough since it is only managed to regulate the administration duties of the franchisor and franchisee. There is no sanction regulated in case one party breach the said regulation. The government has initiated a long time ago to change the regulation because it is out of date. There are many other thing need to be considered such as how is the relation between franchisor’s products and the franchised trademark? The Industrial and Trade Minister Decree No. 259/MPP/Kep/7/1977 only governs the franchise business or product.

It shall be noted that there are some type of franchises could be applied in the practice and it is not necessarily to be registered in all department if it is not related. Therefore beside saving the cost it is also to avoid the unnecessary bureaucracy. But one thing for sure that the regulation of franchise is needed very urgently.