Buying a Franchise: Check Identities and Signing Authority

The brand name above an outlet is not necessarily the name of the business offering the franchise. Prospective franchisees in Indonesia need to establish who will actually be a party to the contract and who is authorised to represent them. These checks help prevent payments to the wrong party and clarify who can be held accountable if obligations are not met.

1. Distinguish between the brand, the company and the sales intermediary

A franchise offer may come from a marketing employee, consultant, agent or a company other than the franchisor. An intermediary’s involvement is not necessarily a problem. However, the person explaining the business package may not have authority to sign the contract or receive payment.

Before proceeding, ask for written clarification of:

• The full name of the individual or business that will be the franchisor under the contract.
• The name of the business issuing the offer and invoices.
• The relationship between the franchisor and the intermediary who contacted you.
• The party that will receive payment and fulfil the contractual obligations.

Make a simple record comparing these names. For example, the proposal might use the name PT A, the draft contract might name PT B, while the payment account is held in an individual’s name. PT is the Indonesian designation for a limited liability company. Do not immediately assume fraud, but do not dismiss these differences as mere administrative details either. Ask for an explanation and supporting documents before agreeing to the transaction.

Terms such as “part of the same group” or “affiliated company” are not sufficient explanations. Companies within the same business group may still have different rights and obligations.

2. Match the legal documents to the contracting party

Indonesia has specific franchise rules under Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. Franchising is conducted under an agreement between the franchisor and franchisee. Establishing the identity of each party is therefore a fundamental check, not simply an administrative formality.

If the prospective franchisor is a limited liability company, request its deed of incorporation, documents confirming its legal entity status and relevant amendments to establish the company’s name and current board appointments. Cross-check these against its Business Identification Number (Nomor Induk Berusaha, or NIB), tax identification details and the address stated in the draft contract.

Use the following checklist:

• Is the company’s full name written consistently throughout?
• Have any changes of name or address been explained?
• Do the board members named in the offer match the latest documents?
• Is the address for serving notices under the contract valid and usable?

Where available, cross-check the information through official legal entity administration and business licensing services. Do not rely solely on screenshots sent by sales staff. If you cannot verify the information independently, seek help from a notary or legal adviser.

The existence of a company and an NIB does not, in itself, prove that all franchise requirements have been met. Identity checks establish “who the party is”; they do not replace other checks on the franchise’s legal compliance.

3. Make sure the signatory is authorised

For limited liability companies, Law No. 40 of 2007 on Limited Liability Companies, as amended, is an important reference. In principle, the board of directors represents the company, but its authority must be considered alongside the law and the company’s articles of association.

Do not assume that anyone with the title of director can sign alone. Check whether the articles of association divide authority between directors or impose particular requirements. If someone signs under a power of attorney, request the written power of attorney and confirm that the person granting it also has the necessary authority.

Check the power of attorney to ensure that:

• The identities of the person granting it and the person authorised to act are clear.
• Its scope covers signing the proposed agreement.
• Its validity period and limits of authority are appropriate for the transaction.
• There is no indication that it has been revoked.

Confirm these details through verified company channels, rather than relying solely on the intermediary’s personal phone number. A company stamp, business card or official-looking email address may help with identification, but none replaces evidence of authority.

Similar checks apply on your side. If you are buying through a company, make sure the franchisee’s name and the representative signing on its behalf are correct from the contract-drafting stage.

4. Align the contract, invoices and payment records

Once identities and authority are clear, check the payment arrangements. The names on the invoices, bank transfer instructions and contract should be consistent. If you are directed to pay another party, request written documentation explaining that party’s relationship to the franchisor and confirming that the payment will discharge your obligation to the franchisor.

Verify any change of bank account through a company contact you have already checked. Do not rely on an unexpected message requesting an urgent transfer, even if it includes documents bearing the company logo.

Keep a single transaction file containing company documents, evidence of authority, the contract and its attachments, invoices, bank account confirmations and proof of payment. Record the date of each check, as board appointments and payment instructions can change.

Practical step: before signing or paying, make sure you can answer three questions: who is the contracting party, who is authorised to represent them, and whose receipt of payment will count as payment to the franchisor? Put the transaction on hold if any of these remains unclear.