The Franchisor’s Legal Liability for Breach of Contract in the Provision of a Franchise Business System

Abstract

The development of the franchise business system in Indonesia has shown significant growth as a business expansion model based on a contractual relationship between franchisors and franchisees. This legal relationship imposes an obligation on franchisors to provide a standardized business system, including standard operating procedures (SOPs), training, operational support, and the transfer of know-how. This study aims to analyze the forms of franchisor breach of contract, the legal basis for liability, as well as legal protection mechanisms and dispute resolution for franchisees within the franchise business system. This study is a normative legal study employing a statutory approach, a conceptual approach, and a case-based approach. The case-based approach is used to examine the application of legal norms in franchise dispute cases related to the franchisor’s failure to provide the business system. The results of the study indicate that Articles 1239 and 1243 of the Civil Code, as well as the principle of pacta sunt servanda, form the primary basis for the franchisor’s legal liability for breach of contract in franchise agreements. Therefore, regulatory strengthening is necessary to create legal certainty. The results of this study indicate that Articles 1239 and 1243 of the Civil Code, as well as the principle of pacta sunt servanda, form the primary basis for the franchisor’s legal liability for breach of contract in franchise agreements. Therefore, regulatory strengthening is necessary to ensure legal certainty, balance among the parties, and the effectiveness of legal protection in franchise business practices in Indonesia. Disputes may be resolved through litigation or alternative dispute resolution methods, such as arbitration and mediation, based on the provisions of the agreement.