05 Mar 2013
MINISTER OF TRADE REGULATION LIMITS THE NUMBER OF RETAIL SHOPS FOR FRANCHISORS AND FRANCHISEES

The Minister of Trade (“Minister”) has issued Regulation No. 68/M-DAG/PER/10/2012 on Modern Retail Shop Franchising, which limits the number of company owned outlets to 150.

The Regulation categorizes retail outlets into company owned outlets and franchised outlets, and limits the number of outlets that can be directly owned by a franchisor and a franchisee to 150. If a franchisor and a franchisee intend to add more outlets to the 150 outlets they already own, they must franchise at least 40% of the additional outlets to other parties.

The 150 outlets threshold applies to modern retail shops of the following spatial area:
a.less than or equal to 400 square meters, for minimarkets;
b.less than or equal to 1,200 square meters for supermarkets;
c.less than or equal to 2,000 square meters for department stores.

Franchisors and franchisees already having 150 outlets are exempted from the above restriction if their outlets have not generated profit as proven by their audited financial statement. Also exempted from the restriction are franchisors who, based on the assessment of the Appraisal Team, have not been successful in finding local franchisees as business partners.

The regulation also rules that 80 percents of the goods sold in the modern retail shops are domestically produced goods in types and volume, although it also states that in certain circumstances the Minister may approve otherwise based on the recommendation of an appraisal team.

Franchisors and franchisees that currently own more than 150 companies owned outlets are given five years to comply with the Regulation. The Regulation has been in effect since 29 October 2012. (by: Amir Angkasa)