Buying a Franchise: Check That the Right to Use the Trade Mark Is Valid

Buying a franchise means acquiring the right to use a business identity, not ownership of its trade mark. In Indonesia’s franchise market, trade mark checks help prospective franchisees avoid a costly problem: paying fees and putting up signage, only to discover that the party offering the franchise has no authority to grant those rights. These checks should take place before you sign an agreement or make any payment that commits you to the deal.

1. Distinguish a popular brand from a protected trade mark

The number of outlets, social media followers and a professional appearance are not proof of trade mark ownership. Nor does a business name appearing in company documents automatically qualify as a registered trade mark. Start by requesting a copy of the trade mark certificate, together with the registration number and details of the owner.

Indonesia specifically regulates franchising through Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. One of the criteria for a franchise is that it must have recorded or registered intellectual property. The main legal reference for checking trade mark rights is Law No. 20 of 2016 on Trade Marks and Geographical Indications, as amended.

Check the trade mark details through the Intellectual Property Database maintained by Indonesia’s Directorate General of Intellectual Property. Match the following:

• The trade mark’s name and graphic elements against the identity your outlet will use.
• The registration number and the owner’s name.
• The registration status and the date protection expires.
• The classes and descriptions of the goods or services covered.

Proof that an application has been filed is not the same as a registration certificate. If the application is still pending, request a written explanation and have a legal adviser review it before making a decision. Do not accept assurances that registration is guaranteed.

Pay attention to the descriptions of goods or services, not just the class numbers. Registration for a particular product does not automatically cover every service offered under the same name.

2. Trace the authority of the party offering the franchise

The trade mark owner may be different from the company offering the franchise. This is not necessarily a problem, but it must be explained through documents establishing the legal relationship and the company’s authority.

For example, the founder may own the trade mark personally, while a company offers the contract. Ask for evidence that the company is entitled to use the trade mark and grant franchisees the right to use it. Do not assume that family ties, shared directors or membership of the same corporate group are sufficient.

For foreign brands or offers made through a master franchisee, trace the chain of authority from the trade mark owner to the party that will sign the agreement with you. Check whether that authority covers Indonesia, the proposed business activities and the right to grant sub-franchises.

Article 42 of the Law on Trade Marks and Geographical Indications governs licences to use registered trade marks. An application must be made to the Minister to record a licence agreement; an unrecorded licence has no legal effect against third parties. If the franchisor’s authority depends on a licence, ask for evidence that it has been recorded and seek legal advice on its scope.

The Franchise Registration Certificate, known locally as the Surat Tanda Pendaftaran Waralaba or STPW, is an important document for franchise operations, but it is not a substitute for a trade mark certificate or evidence of authority to grant a licence. Check each document for its specific purpose.

3. Make sure the duration and scope of trade mark use align

A registered trade mark is protected for ten years from its filing date, and protection can be renewed. Compare the certificate’s expiry date with the proposed agreement term. A certificate nearing expiry is not automatically a reason to reject the brand, but the renewal plans and responsibilities must be clear.

If the franchisor derives its rights from another party, also compare the term of the underlying agreement. A long-term outlet contract becomes risky if the franchisor’s authority expires first and its continuation is uncertain.

Ask for the draft agreement to answer these questions:

• Which trade marks may be used, including names, logos and variations?
• Does permitted use cover outlet signage, packaging, advertising and online sales accounts?
• Who is responsible for renewing registrations and maintaining the authority to use the trade marks?
• Who approves promotional materials or changes to the visual identity?

Attach a clear list identifying the trade marks. Avoid general wording such as “all trade marks owned by the company” without a list or a verifiable process for updating it. This clarity helps franchisees understand the limits of their rights without relying on sales representatives’ promises.

4. Agree safeguards in case a trade mark dispute arises

Trade mark registration does not eliminate every possibility of a dispute. Ask whether there are any objections, lawsuits, cancellation requests or warning letters relating to the trade mark being offered. Request a written response from an authorised party.

Negotiate an obligation for the franchisor to notify you of disputes affecting use of the trade mark. The agreement should also explain who will handle third-party claims and how the costs of legal defence, rebranding the outlet and operational disruption will be allocated. These safeguards need to be agreed; do not assume the franchisor will automatically cover every loss.

Put your decision on hold if documents are withheld, the trade mark owner’s details do not match without explanation, or the authority to grant rights is supported only by verbal assurances. Keep the certificates, check results, evidence of authority and written responses together in one file.

Practical step: before paying, make sure three things are established: the trade mark is protected, the party offering the franchise has the necessary authority, and the contract explains your safeguards if your right to use the trade mark is disrupted.