Buying a Franchise: Check Trade Mark Rights Before You Pay

A brand that customers recognise is not necessarily safe for a prospective franchisee to use. Behind the name and logo are rights holders, limits on protection and permissions that need checking. When buying a franchise in Indonesia, these checks help ensure that your money genuinely secures the right to operate an outlet under the promised brand, rather than simply buying a sign above the door.

1. Distinguish a popular brand from valid trade mark rights

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 is having intellectual property that has been recorded or registered. For trade marks, your checks should focus on evidence of registration and the status of protection, not merely proof that an application has been filed.

Trade mark rights are also governed by Law No. 20 of 2016 on Trade Marks and Geographical Indications, as amended. The key principle for franchise buyers is that rights to a trade mark are acquired once it is registered. So “registration is being arranged” is not the same as “already registered”.

Ask for a copy of the trade mark certificate for the mark your outlet will use. Do not stop at the brand name on the cover of the proposal. If the package includes a business name, logo and product brands that differ from one another, ask for evidence of protection for each and clarification of which are covered by the agreement.

The Franchise Registration Certificate, known in Indonesia as the Surat Tanda Pendaftaran Waralaba or STPW, serves a different purpose from a trade mark certificate. An STPW is no substitute for checking trade mark rights, and a trade mark certificate alone does not prove that all requirements for operating a franchise have been met.

2. Match the certificate to how the mark will be used at the outlet

Check the trade mark information in the Intellectual Property Database maintained by Indonesia’s Directorate General of Intellectual Property. Compare the search results with the certificate and the franchise offer documents. Save your findings, together with the date of the check, so you have a record of the information you relied on when making your decision.

Use the following checklist:

• Owner: does the owner’s name on the certificate match the party offering the franchise?
• Trade mark identity: do the name and logo match those that will appear at your outlet?
• Registration number: can the number on the certificate be matched to the official records?
• Goods or services: is the scope of registration relevant to the proposed business activities?
• Protection period: are the rights still valid, and when is renewal due?
• Status: is there anything requiring clarification, such as a change of ownership or legal proceedings?

Trade mark classes are more than administrative numbers. A mark registered for particular goods does not automatically provide the same protection for every type of service. Read the description of the goods or services, not just the class number. For a business combining product sales with services provided at an outlet, ask an intellectual property adviser to assess whether the coverage is adequate.

If the database and the documents differ, do not immediately assume fraud. Records can take time to update. However, ask for supporting official evidence before making any further payment.

3. Trace the permissions from the owner through to you

A difference between the trade mark owner’s name and the franchisor’s name is not automatically a problem. The mark may belong to a founder, another company within the group or an overseas owner. What needs to be established is the chain of authority allowing the franchisor to grant you the right to use it.

If the franchisor does not own the mark, ask for documents showing the basis of its authority. Check whether the permission covers use in Indonesia, the proposed business activities and the right to grant further permission to franchisees. Being part of the same corporate group is no substitute for evidence of authority.

Also compare the term of the underlying licence with the term of your contract. For example, the franchisor might offer an agreement that runs beyond the expiry of its own permission to use the mark. Ask what guarantees your continued use of the mark for the rest of the contract, rather than simply accepting a promise that the licence will be renewed.

Indonesia’s Trade Marks Law also provides for the recording of licence agreements; an unrecorded licence agreement has no legal effect against third parties. Ask a legal adviser to assess the licence documents and the requirements for recording them. Do not assume that franchise registration automatically resolves all trade mark licensing matters.

4. Include protection against problems with trade mark rights

Your findings should be reflected in written contractual obligations. Ask the franchisor to confirm that it has authority to grant the right to use the mark and to disclose any disputes or restrictions that could affect your outlet.

Also negotiate who must maintain the trade mark protection and notify you of any legal claim, cancellation or expiry of the underlying licence. The contract should address who handles third-party claims and pays for legal assistance, replacement signage, packaging and promotional materials if the problem stems from the franchisor’s trade mark rights.

Rebranding is not a cost-free solution. Customers may no longer recognise the outlet. Agree on the options available if the mark can no longer lawfully be used, including adjustments to payment obligations or termination of the franchise relationship and the financial consequences. These protections need to be negotiated, not assumed to apply automatically.

Practical step: before paying, cross-check the certificate, official status, chain of permissions and contractual provisions for handling trade mark problems. If any element remains unclear, delay committing funds until the evidence and allocation of responsibilities are adequate.