Auditing Your Trade Marks Before Franchising in Indonesia

A brand that customers recognise is not necessarily ready for use by franchisees. The trade mark certificate may still be in the founder’s name, its protection may not cover the core services, or the logo used at outlets may differ from the registered version. Before offering a franchise, carry out a trade mark audit to ensure you can actually grant the rights you promise. Within a franchise network, this clarity protects both the business owner’s investment and franchisees’ trust.

1. Distinguish a popular brand from protected rights

The main legal framework for franchising in Indonesia is Government Regulation No. 35 of 2024 on Franchising, which replaced Government Regulation No. 42 of 2007. One of its criteria is ownership of recorded or registered intellectual property. Other criteria include having a business system, a business that has already generated profits, and ongoing support for franchisees.

For trade marks, the relevant legislation is Law No. 20 of 2016 on Trade Marks and Geographical Indications, as amended. Trade mark rights are acquired once the mark is registered. Do not, therefore, treat proof of filing an application as equivalent to a trade mark certificate.

A company name, Business Identification Number (NIB), domain name and social media accounts are not substitutes for trade mark registration either. Each serves a different purpose. A business may have all these identifiers and still face problems with rights to the trade mark displayed at its outlets.

Start by listing the assets franchisees will use: the main brand name, logo, flagship product names and slogans. Mark which are registered, pending or not yet checked. Do not assume that registering one logo automatically protects every variation of the business’s brand identity.

2. Check ownership, status and scope of protection

Compare the certificates and records in the Intellectual Property Database maintained by Indonesia’s Directorate General of Intellectual Property (DJKI) with actual use at outlets. This initial check can help identify problems, but it is no substitute for a trade mark search and legal advice where there is a potential conflict with another mark.

Create an audit sheet with the following columns:

• Trade mark identity: the name or version of the logo protected.
• Registered owner: the individual or legal entity holding the rights.
• Number and status: the registration number, protection status and supporting documents.
• Goods or services: the classes and descriptions of goods or services covered.
• Protection period: the expiry date and the person responsible for renewal.
• Actual use: the outlets, packaging, apps and promotional materials using the mark.

Pay attention to the descriptions of goods or services, not just the class numbers. A trade mark for packaged food products does not automatically provide the same protection for restaurant services. If your franchise plans cover both, check the protection needed for each.

Registered trade mark protection lasts for ten years from the filing date and can be renewed in accordance with the applicable rules. Set reminders well before expiry so that an administrative oversight does not disrupt use of the mark across the franchise network.

3. Put the chain of rights in order before promising use

A common problem arises when the founder owns the trade mark personally, while the proposed franchisor is a company. This does not automatically prevent a franchise arrangement, but the company must have a clear legal basis for authorising franchisees to use the mark.

Discuss with your legal adviser whether the rights should be assigned to the company or licensed by the trade mark owner. These options have implications for asset management, taxation and business continuity. If you use a licence, check explicitly whether it includes authority to grant franchisees the right to use the mark.

Under the Trade Marks Law, an application must be made to record a licence agreement with the Minister through DJKI. An unrecorded licence has no legal effect against third parties. This is different from saying that every unrecorded licence is automatically invalid between the parties.

Also check arrangements with the logo designer, previous owners or co-founders. Keep assignment documents, consents and related agreements on file. Do not wait for an internal dispute to arise after franchisees have installed their signage.

4. Reflect the audit findings in the franchise agreement

The franchise agreement needs to specify which trade marks may be used and the limits on their use. Avoid overly broad wording such as “the franchisee may use all the company’s trade marks” if the rights available are actually narrower.

Address at least five points:

1. Identification of rights: the relevant trade marks and registration numbers.
2. Scope of use: permitted locations, sales channels, and goods or services.
3. Quality control: checks on trade mark use and procedures for correcting non-compliance.
4. Handling infringement: who receives reports, gathers evidence and decides what action to take.
5. End of the relationship: stopping use on signage, packaging, digital accounts and promotional materials.

Align the term of the agreement with the period for which trade mark rights will be available, including renewal plans. Also specify who will handle the work and bear the costs if a change of brand identity becomes necessary. Franchisees should not be expected to take on rebranding risks without an explanation and a reasonable process for dealing with them.

5. Make the audit a final check before offering the franchise

Government Regulation No. 35 of 2024 requires the franchise offering prospectus to include intellectual property certificates or evidence of recordal. The prospectus must be provided at least 14 calendar days before the franchise agreement is signed. The franchisor must also hold a Franchise Registration Certificate (STPW) before entering into that agreement.

A trade mark audit is therefore not an administrative task to leave until after franchisees have been recruited. Appoint someone to resolve ownership discrepancies, gaps in protection or issues with licensing authority before promising rights of use.

Practical step: gather the certificates, map trade mark ownership and coverage, then compare these with the rights to be granted under the contract. If the chain of rights is not clear, resolve it before expanding your franchise network.