Buying a Franchise: Check Who Is Authorised to Sign the Contract

A familiar brand name is not necessarily the name of the company signing the contract. Nor is the person presenting the package necessarily authorised to bind that company. Before entering the Indonesian franchise market, prospective franchisees need to establish who their contractual partner actually is, who may represent it and who will receive their payments. These checks help avoid uncertainty over responsibility when promises made during the sales process must be honoured.

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

A single franchise offer may involve several parties: the brand owner, an operating company, a sub-franchisor and a marketing agent. Their relationships may be legitimate, but each party’s role must be clear. A branded email address or business card does not, on its own, prove authority to sign an agreement.

Draw up a simple list covering:

• The name of the brand being offered.
• The full name of the individual or business entity named as the franchisor in the contract.
• The name and position of the person who will sign.
• The name of the party issuing invoices and receiving payments.
• The name of the party responsible for fulfilling the obligations under the agreement.

Compare this list with the franchise offering prospectus, draft contract, company documents and invoices. Differences in names do not automatically indicate a breach, but they must be explainable through relevant documentation.

For example, if a marketing company delivers the presentation but the contract is with another company, ask for a written explanation of their relationship. Make sure any important promises made by sales staff are confirmed by the party that will be bound by the contract, rather than remaining solely in sales conversations.

2. Use the right legal framework

Indonesia has specific franchise legislation: Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. Franchise operations must be based on a written agreement. The regulation also requires the offering prospectus to be provided to prospective franchisees at least 14 calendar days before the agreement is signed.

Use the offering documents to cross-check the parties’ identities, rather than simply looking at the package price. Receiving a prospectus and confirming that the franchise is registered are not substitutes for checking the signatory’s authority.

The general contract provisions of the Indonesian Civil Code are also relevant. Article 1320 sets out the requirements for a valid agreement, while Article 1338 states, in essence, that a lawfully concluded agreement is binding on the parties. Clarity about who the parties are and who is entitled to represent them therefore has real consequences.

For an Indonesian limited liability company, or perseroan terbatas (PT), another important reference is Law No. 40 of 2007 on Limited Liability Companies, as amended. In principle, the board of directors represents the company, but that authority must be considered alongside the applicable law and the company’s articles of association. Being a commissioner, development manager or head of marketing does not automatically confer the same authority.

3. Check the basis of authority, not just the job title

Ask for sufficient documentation to trace the signatory’s authority. For a limited liability company, this usually means checking the deed of establishment, relevant amendments, the current composition of the board of directors and the appropriate documents recording legal entity approval, approval of amendments or acknowledgement of notifications. Legal entity details can be cross-checked through Indonesia’s official General Legal Administration services.

Do not stop once you find someone’s name listed as a director. Check whether the articles of association require joint representation, restrict certain actions or require additional approval. Not every transaction requires shareholder or commissioner approval; the requirements depend on the applicable provisions and company documents.

If the signatory is acting under a power of attorney, check four things:

1. The person granting authority: are they themselves authorised to represent the company?
2. The person receiving authority: does their identity match that of the signatory?
3. Scope: does the power of attorney cover signing this particular franchise agreement?
4. Validity: is the power of attorney still valid, including on the signing date?

Authority to market a package does not necessarily include authority to enter into a contract or receive payment. If the documents are complex, ask a lawyer or notary to help review them. The aim is not to collect as much paperwork as possible, but to ensure that the chain of authority can be demonstrated.

4. Align the contract, invoices and payments

Once identity and authority are clear, make sure the opening section and signature blocks of the contract consistently identify the same parties. A person signing for a company should be expressly described as acting in their official capacity or under a specific power of attorney, rather than appearing to enter into the agreement personally.

Also check that the receiving bank account matches the party entitled to payment. An account in a different name requires an explanation and written instructions that you can verify with your contractual partner. If an affiliated company or another party receives the payment, obtain explicit confirmation that it will count towards settling your obligations under the relevant invoice.

Before transferring funds, contact the company through a channel you have verified, particularly if the bank details have changed unexpectedly. Keep the final contract, relevant evidence of authority, payment instructions and receipts together in one file.

Practical step: do not sign or pay until you can answer three questions: who is bound by the agreement, who is legally authorised to represent them and who is entitled to receive the funds? If any answer remains unclear, put the transaction on hold until the explanation is documented.