Franchise Policy Update: Local Governments Now Have the Authority to Issue STPW for Certain Franchisees

Under Minister of Trade Regulation Number 25 of 2025 on Procedures for Issuance of Franchise Registration Certificates by Local Governments (“MOTR 25/2025”), certain categories of Franchise Registration Certificate (Surat Tanda Pendaftaran Waralaba, “STPW”) are now issued by local governments. This regulation also reinforces and clarifies verification procedures, particularly regarding franchise agreements and the legal protection status of Intellectual Property (“IP”). Businesses must ensure full compliance with both MOTR 25/2025 and Government Regulation Number 35 of 2024 on Franchising (“GR 35/2024”) to avoid delays or rejections in the application process. This article outlines the key changes and highlights the importance of accurate and up-to-date IP documentation in franchise licensing.

Introduction

Indonesia’s franchise regulatory landscape has undergone significant developments over the past two years. In 2024, the government enacted GR 35/2024, which was discussed in our previous articleearlier article. GR 35/2024 introduces several key requirements, including the mandatory implementation of Standard Operating Procedures (“SOP”) and the submission of audited financial statements for the past two years as proof of business profitability. As a follow-up to GR 35/2024, the Ministry of Trade has issued MOTR 25/2025, serving as its implementing regulation.

Importantly, under MOTR 25/2025, the Indonesian government delegates the authority to issue STPWs only for certain categories of franchisees to local governments, specifically for:¹

Franchisees of domestic franchisors,
Sub-franchisees of foreign franchisors, and
Sub-franchisees of domestic franchisors.

This article explores the implications of these regulatory updates and the critical role of IP in the franchise registration process.

Why STPW Matters for Franchisees?

STPW is a fundamental requirement for franchisors, franchisees, and even sub-franchisees to operate lawfully and be recognized under Indonesian law. It serves as a form of business licensing that legitimizes franchise operations within the regulatory framework.

Franchisees, regardless of whether they receive their franchise from a domestic or foreign franchisor, are required to obtain an STPW before commencing any business activity.² In this context, an STPW is an integral part of a business’s legal foundation, ensuring that the franchise arrangement complies based on prevailing licensing requirements. Without an STPW, the franchise arrangement cannot be considered valid based on prevailing licensing requirements, meaning the business cannot operate lawfully.

Beyond its administrative function, the STPW also provides a compliance framework that strengthens the legal position of both franchisors and franchisees in carrying out their respective roles.

MOTR 25/2025: What Has Changed?

As the implementing regulation of GR 35/2024, MOTR 25/2025 outlines several updates to the issuance of STPWs for franchisees, including:

STPWs for Franchisees Now Issued by Local Governments
Under MOTR 25/2025, the authority to issue STPWs for franchisees has been delegated to local governments, but only for certain types of franchisees as listed under Article 2 Paragraph (1) of MOTR 25/2025. Meanwhile, another type of franchisees, which is the one directly receiving a franchise from a foreign franchisor, remains outside the scope of this regulation and is subject to the earlier procedures.For franchisees under those eligible categories, the STPW is now issued by the Governor of Jakarta Special Capital Region, the Head of the Nusantara Capital Authority (Ibu Kota Nusantara, “IKN”), and Regents/Mayors, through the respective One-Stop Integrated Services Agency (Dinas Penanaman Modal dan Pelayanan Terpadu Satu Pintu, “DPMPTSP”) or the Business Licensing Unit in the IKN.³

Formalization of Document Verification Standards
The STPW for Franchisees now requires two main documents:⁴

A registration form downloaded from the OSS and filled out manually; and

A franchise agreement.Notably, MOTR 25/2025 mandates that the franchise agreement contain at least 15 essential clauses, including but not limited to:⁵

identity of the parties;	the term of the franchise agreement;
proof that the IP used in the franchise is valid (registered and within their protection period);	the method of payment of compensation;
*business activities;**	ownership and transfer of franchise ownership;
business system;	dispute resolution;
rights and obligations of the parties;	the procedure for extending and terminating the franchise agreement;
assistance, facilities, operational guidance, training, and marketing by the franchisor	guarantees from the franchisor to continue fulfilling its obligations; and
business area;	number of outlets.
compensation if the business is terminated prematurely*

*these two clauses were not explicitly required under the previous regulation, Minister of Trade Regulation Number 71 on 2019 concerning the Implementation Of Franchising (“MOTR 71/2019”), which reflect a more detailed compliance framework introduced by MOTR 25/2025.

In the context of IP, it is important to note that MOTR 25/2025 emphasizes the obligation that “intellectual property must still be under protection.”

As such, the above provision has direct implications for franchise businesses. In cases where a franchise business uses an unregistered trademark, an expired trademark, or lacks valid proof of use rights, the STPW application may be returned for revision or even rejected.⁶

Therefore, it is important to note that the Indonesian Government, through MOTR 25/2025, emphasizes the obligation that any IP used in a franchise business must be legally registered and still within its period at the time the STPW application is submitted. As such, the above provision has direct implications for franchise businesses. Where, in cases where the franchise agreement references an unregistered trademark, an expired one, or lacks valid proof of use or ownership rights, the STPW application may be returned for revision, or even rejected.⁷

This confirms that IP documents are no longer merely formal attachments but have become one of the substantive elements determining the approval of STPW applications.

STPW Issuance Timeline
MOTR 25/2025 sets a fixed timeline: the STPW must be issued within five (5) business days from the date the application is deemed complete.⁸ Should the authority fail to meet this deadline, the registration form that has been filled out manually and submitted through the OSS may be used as a temporary license to commence business operations.⁹ This procedural update provides legal certainty and prevents administrative delays.
Additional Requirement for the Education Sector
Franchisees operating in the education services sector, such as tutoring institutions, are required to submit a valid Business License in the field of educational tutoring services as an additional requirement during the STPW verification process.¹⁰

What do These Changes Mean for Franchisees?

The regulatory updates under MOTR 25/2025 compel franchisees, particularly those falling within the scope of the regulation, to adopt a more structured and compliance-driven approach. As this regulation only governs the issuance of STPWs for (i) franchisees of domestic franchisors, (ii) sub-franchisees of foreign franchisors, and (iii) sub-franchisees of domestic franchisors, the affected businesses must ensure that their applications are both complete and aligned with the documentation and verification standards set forth by local authorities. They should also anticipate minor differences in how procedures may be carried out by different local governments on each jurisdiction.

In line with this heightened scrutiny, particular attention should also be paid to IP referenced in the franchise, such as trademarks, which must remain valid (duly registered and within their protection period). While IP had already been a component of previous franchise regulations, MOTR 25/2025 explicitly stipulates that failure to meet this requirement may result in the application being returned for revision or even rejected¹¹ , an enforcement mechanism not clearly outlined under MOTR 71/2019.

For further information or assistance in ensuring that your IP protection documents comply with the provisions of MOTR 25/2025 and GR 35/2024 in relation to STPW applications, please contact us at ADCO Law.

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