Global Trade Alert

On 29 October 2012, the Ministry of Trade issued regulation 68/M-DAG/PER/10/2012 on Franchising of Modern Store Businesses. The legislation introduces the following regulations:

• Limit of the maximum number of outlets directly owned by a retail entrepreneur is 150. If an entrepreneur wants to have more outlets, then at least 40% of them must be franchised to other parties (resident franchisees). The entrepreneur can be exempted from the requirement if the business "has yet to achieve profit based on the last two years of the financial reporting or if the said entrepreneur as the franchisor does not find a resident entrepreneur as a franchisee".
• Locally produced goods must be at least 80% of the amount and the type of goods being sold.

The regulations have to be implemented within 5 years after the Minister's Regulation. This has to be achieved by changing the ownership of at least 20% of the outlets requiring the change annually.
In 2010, out of 370 major players of the Indonesian franchise industry, 278 were foreign (Indonesian Franchise Association).
The affected trading partners were found by taking the top foreign franchisees in Indonesia (>1 billion Rp.).