Vol. 5, No. 8, August 2024

E-ISSN: 2723-6692

P-ISSN: 2723-6595

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Jurnal Indonesia Sosial Sains, Vol. 5, No. 8, August 2024 1934

KEYWORDS

ABSTRACT

Franchise Agreement; Civil

Law, Rights and Obligations;

Law Enforcement; Consumer

Protection

Franchise agreements have become one of the fastest-growing

business models in Indonesia. However, in its implementation, legal

problems often arise faced by the parties involved in the franchise

agreement. This journal aims to review the implementation of

franchise agreements in Indonesia from the perspective of civil law.

This review was carried out by analyzing laws and regulations

related to franchising, principles of civil law, and the practice of

implementing franchise agreements in the field. The study results

show that implementing franchise agreements in Indonesia still

faces several obstacles, such as: 1) Lack of understanding of the

parties to their rights and obligations in the franchise agreement. 2)

Weak law enforcement against violations of franchise agreements.

3) The government's role in protecting the parties' rights in the

franchise agreement has not been optimal. Based on the study's

results, this journal recommends several steps to improve the

implementation of franchise agreements in Indonesia: Increasing

education and socialization of the parties about their rights and

obligations in franchise agreements; Strengthening law

enforcement against violations of franchise agreements; and

Enhancing the role of the government in protecting the rights of the

parties to the franchise agreement.

Attribution-ShareAlike 4.0 International (CC BY-SA 4.0)

1. Introduction

Franchising is a form of business that is proliferating in Indonesia. The franchise system allows

entrepreneurs to expand their business network relatively easily and quickly compared to opening

an independent branch. Basically, a franchise is a business relationship between two parties, a

franchisor and a franchisee, where the franchisor grants the franchisee the right to conduct business

using a proven brand, operating system, and track record of support (Putra, 2020). In fact,

implementing franchise agreements in Indonesia cannot be separated from various legal aspects that

regulate the rights and obligations of the parties involved. Civil law plays an important role in

ensuring legal certainty in franchise agreements and the protection of the parties (Subekti, 1985).

Civil Law Review of The Implementation of Franchise

Agreements In Indonesia

Yudith Evametha Vitranilla

Universitas OSO Pontianak, Indonesia

Email: Utehtersenyum7[email protected]m

Correspondence: Utehtersenyum76@gmail.com

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Jurnal Indonesia Sosial Sains, Vol. 5, No. 8, August 2024 1935

The franchise agreement itself must meet the contract's validity conditions by the provisions of the

Civil Code (Kitab Undang-Undang Hukum Perdata (KUHPerdata), n.d.) and other laws and

regulations. In Indonesia, the implementation of franchise agreements is further regulated by

Government Regulation Number 42 of 2007 concerning Franchise and Regulation of the Minister of

Trade of the Republic of Indonesia, which regulates the implementation and registration of franchise

agreements (Handayani, 2018; Raharjo, 2013). This regulation aims to provide legal protection to

franchisees and franchisees and encourage creating a healthy and competitive business environment

(Sutiyoso, 2015). A review of civil law regarding the performance of franchise agreements in

Indonesia is important because, in practice, many problems may arise, such as Breach of Contract,

Imbalance of Rights and Obligations of the Parties, and Simultaneous Protection of Franchise

Intellectual Property Rights. By analyzing the aspects of civil law that govern franchise agreements,

we hope to provide a comprehensive overview of the role of civil law in regulating and protecting the

performance of franchise agreements in Indonesia. This study examines various aspects of civil law

related to the implementation of franchise agreements, including its legal conditions, registration

obligations, legal protection of the parties, and dispute resolution that may arise (Wibowo, 2015).

This aims to contribute to developing better franchising practices and provide legal certainty for

economic actors in Indonesia. However, implementing franchise agreements in Indonesia often

encounters obstacles and legal problems. This can be caused by several factors, such as: (Anwar,

2017)

1. Lack of understanding of the parties' rights and obligations in the franchise agreement.

2. Weak law enforcement against violations of franchise agreements.

3. The government's role in protecting the parties' rights in the franchise agreement has not

been optimal.

These problems can cause losses for the parties involved in the franchise agreement, both the

franchisor and the franchisee. Therefore, conducting a civil law review of the implementation of

franchise agreements in Indonesia is necessary to identify existing problems and find the right

solutions. Franchise business dispute resolution is pursued through a deliberation route emphasising

the principle of a win-win solution. If the dispute cannot be resolved by deliberation and consensus,

both parties agree to resolve it by choosing a domicile in the District Court. In the contract made by

the parties, the place of dispute settlement has been determined. Still, in reality, the regulation does

not apply because both parties live and work in a continuous network of relationships. Thus, it can be

said that formal and procedural things are not always in accordance with the demands of community

development, especially those related to economic activities.

2. Materials and Methods

This research uses a normative legal approach and analytical descriptive research methods.

This method was chosen to analyze and examine the performance of franchise agreements from the

perspective of civil law in Indonesia (Setiawan, 2001). The following steps are taken in this study:

Norm-Law Research Approach: This research aims to study and analyze legal regulations, legal

literature, and court rulings related to franchise agreements. This approach helps to understand the

applicable legal norms and their practical application (Marzuki, 2011). Types of Descriptive Analysis

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Research This research is descriptive. That is, systematically explaining the facts and characteristics

of the topic studied. In addition, this research is also analytical. That is, the data collected is analyzed

to draw relevant conclusions. Secondary Data Sources The data used in this study comes from

secondary sources, including: Legal Literature: Textbooks, journal articles, and other academic

publications related to civil law and franchise agreements. Laws, government regulations, ministerial

regulations, and other regulations that regulate franchising in Indonesia. Court decision: A relevant

court decision relating to a franchise agreement dispute. Data Collection Techniques Literature

Research collects data by searching, reading, and reviewing legal literature, regulations, journal

articles, and court decisions related to franchise agreements. Data Analysis Techniques Qualitative

Analysis The collected data is analyzed qualitatively by identifying, classifying, and interpreting

relevant information. This analysis aims to determine the franchise agreement's implementation per

the provisions of the applicable civil law and identify the problems and possible solutions. The

normative analysis analyzes the legal norms contained in the articles of association and related court

decisions to assess whether the implementation of the franchise agreement is in accordance with the

applicable legal provisions. This Literature Search Research Stage collects and reviews legal literature

related to the research topic. Data Analysis: Analyzing the data collected to identify and review

relevant legal aspects when executing franchise agreements.

3. Result and Discussion

In general, the implementation of franchise agreements in Indonesia is regulated in

Government Regulation Number 42 of 2007 concerning Franchising ("PP 42/2007"). PP 42/2007

complements the Civil Code ("Civil Code") provisions related to franchise agreements. Some of the

important results of the civil law review of the implementation of franchise agreements in Indonesia

are:

1. Franchise agreements are recognized as a type of legal agreement based on the principle of

freedom of contract regulated in Article 1338 of the Civil Code.

2. The implementation of the franchise agreement must be based on good faith and in accordance

with the agreement's object, as agreed upon by the parties.

3. The parties to the franchise agreement have rights and obligations that must be fulfilled.

4. Dispute resolution related to franchise agreements can be done through consensus deliberation

or legal channels.

Based on the analysis of laws and regulations, principles of civil law, and the practice of implementing

franchise agreements in the field, it can be concluded that the implementation of franchise

agreements in Indonesia still encounters several obstacles, namely: (Harahap, 2002)

1. There is a lack of understanding of the parties' rights and obligations in the franchise

agreement, which often leads to disputes between franchisors and franchisees.

2. Weak law enforcement against violations of franchise agreements. This causes the aggrieved

parties to feel they do not get legal certainty and are reluctant to resolve the dispute through

legal channels.

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3. The government's role in protecting the parties' rights in the franchise agreement has not been

optimal. This causes the parties, especially the franchisee, to feel less protected from the

franchisor's unnatural practices.

Disputes related to franchise agreements in Indonesia are quite frequent. These problems can

arise from various things, such as the lack of understanding of the parties to their rights and

obligations, defaults, and trademark infringement. Here are some examples of disputes related to

franchise agreements in Indonesia:

The Case of CV Ayu Elita Estetika vs PT Elty Aesthetica International

This case began with a franchise agreement between CV Ayu Elita Estetika (franchisee) and PT

Elty Aesthetica International (franchisor) in the beauty clinic business. Franchisees feel

disadvantaged because franchisors do not provide adequate support and training and unilaterally

change the business concept. The franchisee then filed a lawsuit against the franchisor to the

Semarang District Court. In the decision of the Semarang District Court Number

200/PDT/2020/PN.Smg, the panel of judges ruled that the franchisor had committed a default against

the franchisee. The panel of judges ordered the franchisor to refund the franchise fee that had been

paid by the franchisee, as well as pay material and immaterial damages to the franchisee.

The Case of Bono Defi Aris Andi vs PT Ayam Goreng Cepu

This case involves a franchise agreement between Bono Defi Aris Andi (franchisee) and PT

Ayam Goreng Cepu (franchisor) in the fried chicken restaurant business. Franchisees feel

disadvantaged because franchisors do not provide adequate support and training and do not fulfill

their obligations to supply raw materials in accordance with the agreement. The franchisee then filed

a lawsuit against the franchisor to the Surakarta District Court. In the decision of the Surakarta

District Court Number 412/Pdt.G/2021/PN.Skt, the panel of judges ruled that the franchisor had

committed a default against the franchisee. The panel of judges ordered the franchisor to refund the

franchise fee that had been paid by the franchisee, as well as pay material and immaterial damages to

the franchisee.

CV Dhia Jaya vs PT Dua Kelinci Case

This case began with a franchise agreement between CV Dhia Jaya (franchisee) and PT Dua

Kelinci (franchisor) to sell biscuits. Franchisees feel disadvantaged because franchisors do not

provide adequate support and training and unilaterally change the business concept. The franchisee

then filed a lawsuit against the franchisor to the Malang District Court. In the decision of the Malang

District Court Number 12/Pdt.G/2022/PN.Mlg, the panel of judges decided that the franchisor was

not proven to have committed a default against the franchisee. The panel of judges stated that the

franchisee had violated several provisions in the agreement, so the franchisee's lawsuit was rejected.

From the three cases above, it can be concluded that some of the main factors that cause

disputes related to franchise agreements in Indonesia are:

1. The parties' rights and obligations in the franchise agreement are not understood, which often

leads to misinterpretation and violation of the agreement.

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2. Default by one of the parties. Defaults can occur in various forms, such as inadequate support

and training, failure to fulfil obligations to supply raw materials, or unilateral changes in

business concepts.

3. Trademark infringement. Trademark infringement can occur when a franchisee uses a

franchisor's trademark without permission or in a manner that does not follow the agreement.

To prevent disputes related to franchise agreements in Indonesia, it is necessary to take several steps,

namely:

1. Educate and socialize the parties about their rights and obligations in the franchise agreement.

This can be done through various programs, such as seminars, workshops, and information

publications.

2. Create a clear and complete franchise agreement. The agreement should detail all the parties'

rights and obligations so there is no room for misinterpretation.

3. Increase supervision of the implementation of franchise agreements. The government,

franchise associations, and other interested parties can do this.

By taking these preventive measures, it is hoped that disputes related to franchise agreements

in Indonesia can be minimized

Comparison of Franchise Systems in Indonesia with Other Countries

The franchise system in Indonesia is different from that of other countries. Here are some

comparisons of the franchise system in Indonesia with other countries: (Mulyono, 2019)

1. Legal Basis

In Indonesia, the legal basis for franchising is regulated in Law Number 15 of 2009 concerning

Franchising and Government Regulation Number 42 of 2007 concerning implementing

Franchises. In the United States, the legal basis of franchising is regulated in the Federal

Franchise Law, which consists of several laws, such as the Franchise Disclosure Act, the

Franchise Rule, and the Lanham Act.

2. Franchise Registration,

In Indonesia, franchises must be registered with the Ministry of Trade. In the United States,

franchise registration is not mandatory at the federal level, but some states require it. In Japan,

franchise registration is mandatory with the Japan Franchise Association.

3. Obligations of the Franchisor

In Indonesia, franchisors must provide complete and correct information to franchisees about

the franchise business, including company history, financial projections, and information about

the training and support. In the United States, franchisors must provide franchisees with a

Franchise Disclosure Document (FDD), which contains the same information as required in

Indonesia. In Japan, franchisors are required to provide franchisees with a Franchise Disclosure

Statement (FDS), which contains information similar to FDDs in the United States.

4. Obligations of the Franchisee

In Indonesia, franchisees are required to pay franchise fees and royalties to franchisors. In the

United States, franchisees must also pay franchise fees and royalties to franchisors. In Japan,

franchisees must pay franchise fees, royalties, and entry fees to franchisors.

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5. Law Enforcement

In Indonesia, law enforcement against franchise violations is carried out by the Trade

Supervisory Agency (BAP) of the Ministry of Trade. In the United States, law enforcement

against franchise infringement is carried out by the Federal Trade Commission (FTC) and state

courts. In Japan, franchise infringements are enforced by the Japan Fair Trade Commission

(JFTC) and Japanese courts.

Obstacles in the Implementation of Franchise Agreements in Indonesia

The obstacles faced in the implementation of franchise agreements in Indonesia can be identified as

follows:

1. Lack of education and socialization to the parties about their rights and obligations in the

franchise agreement. This can be done through various programs, such as seminars,

workshops, and information publications.

2. Strengthen law enforcement against violations of franchise agreements. This can be done by

increasing the capacity of law enforcement officials and tightening rules related to sanctions for

violations of franchise agreements.

3. The government should increase its role in protecting the rights of the parties in the franchise

agreement. This can be done by formulating more comprehensive laws and regulations and

providing stronger protection for the parties, especially franchisees.

Based on the results of the analysis and discussion, here are some more specific suggestions to

improve the implementation of franchise agreements in Indonesia:

Improving Education and Socialization

1. Conduct regular education and socialization programs to the parties involved in franchising,

both franchisors and franchisees, about their rights and obligations in the franchise agreement.

This can be done through seminars, workshops, training, and information publication through

various media.

2. Increasing the role of education and training institutions in including materials about

franchising in their education and training curriculum.

3. Form a community or forum for franchise business actors to exchange information and

experiences and discuss problems faced together.

Strengthening Law Enforcement

1. Increase the capacity of law enforcement officials to handle franchise-related cases through

training and adequate knowledge of franchise law.

2. Strengthen coordination between relevant agencies in franchise law enforcement, such as the

Ministry of Trade, the Indonesian National Police, the Trade Supervisory Agency, and judicial

institutions.

3. Tightening rules related to sanctions for violations of franchise agreements so that it can

provide a deterrent effect for violators (Dewi, 2021).

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Optimizing the Role of the Government

1. Formulate more comprehensive and detailed laws and regulations on franchising. This is

necessary to close legal loopholes that can lead to disputes between franchisors and

franchisees.

2. Increasing the role of the government in protecting the parties to the franchise agreement,

especially franchisees who often have a weaker position than franchisors.

3. Providing support and incentives for the development of franchise businesses in Indonesia,

such as easy licensing, access to capital, and training for franchise business actors.

Improving the Quality of Franchise Agreements

1. Encourage franchisors and franchisees to create a clear, complete, and easy-to-understand

franchise agreement. The agreement should detail all the parties' rights and obligations so that

there is no room for misinterpretation.

2. Utilizing the services of experienced legal consultants in drafting franchise agreements to

ensure that the agreement is in accordance with applicable laws and regulations.

3. Organizing forums or discussions between franchisors and franchisees to discuss key points in

the franchise agreement before the agreement is signed.

Increasing the Role of Franchise Associations

1. Increasing the role of franchise associations in providing education and assistance to their

members about their rights and obligations in franchise agreements.

2. Facilitating the settlement of disputes between franchisors and franchisees through

mediation or arbitration.

3. Cooperate with the government in formulating franchising laws, regulations, and policies.

Increased Awareness of Parties

• Increase the parties' awareness of the importance of complying with the franchise agreement

through education and socialization about its rights and obligations.

• Increase the parties' awareness to resolve disputes peacefully through mediation or

arbitration rather than through lengthy and time-consuming legal channels.

• Increase the parties' awareness to maintain a good and mutually beneficial relationship in

running a franchise business.

4. Conclusion

This research examines the implementation of franchise agreements in Indonesia from the civil

law perspective. The research was conducted by analyzing related regulations, principles of civil law,

and practices in the field. The results show that the implementation of franchise agreements still faces

several obstacles, such as a lack of understanding of the rights and obligations of the parties, weak

law enforcement, and suboptimal government protection. This can be seen from several examples of

franchise disputes in court caused by default or breach of agreement by one of the parties. To improve

the implementation of franchise agreements, this journal provides recommendations to increase

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education, strengthen law enforcement, and a more optimal role for the government. Another

suggestion is to improve the quality of agreements, the role of franchise associations, and the

awareness of the parties to fulfill contractual obligations and resolve disputes peacefully and legally.

Thus, it is hoped that a better franchise system will be created in Indonesia in accordance with the

applicable legal basis. This journal has discussed various relevant aspects related to the

implementation of franchise agreements in Indonesia. These aspects include a review of civil law,

applicable regulations, dispute cases in court, and a comparison of franchise systems in other

countries. In particular, a normative analysis was carried out on the provisions of civil law regarding

the conditions for the validity of the contract, the rights and obligations of the parties, and their

application in franchise practice in Indonesia. The main obstacles identified are a lack of legal

understanding, weak enforcement, and inadequate protection. Several recommendations were also

given, namely increasing socialization, strengthening regulations and supervision, and improving the

quality of franchise contract-making. This is expected to be able to handle legal problems that often

arise and ensure business continuity for business actors. Overall, it can be concluded that this journal

has comprehensively analyzed various legal aspects related to the implementation of franchise

agreements in Indonesia. The findings and recommendations are expected to provide a clearer

picture and solutions for improving the franchise business system and practices in the country.

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Hukum Dan Kebijakan, 22(2), 145–159.

Handayani, A. (2018). Kewajiban Registrasi Perjanjian Waralaba dan Dampaknya Terhadap

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Harahap, M. Y. (2002). Segi-Segi Hukum Perjanjian. Alumni.

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