T

he world's best-known fast-food chain, McDonald's, is bracing for a lengthy legal battle in Indonesia, following a breakup with its local partner of 18 years, Bambang Rachmadi.

A lawyer for the company, Ricardo Simandjuntak, said Tuesday a hearing had been scheduled for August at the South Jakarta District Court, to present representatives from the company's headquarters in the US.

"A hearing was held on May 19, and the court decided to postpone the first session to August, after considering it would take some time to summon representatives from abroad," Ricardo said, adding he could not make further statements prior to the court hearing.

McDonald's has decided to appoint a new master franchisee for its products to replace Bambang, and to sell assets in the form of 97 restaurants to PT Sinar Sosro, producer of Indonesia's best-selling soft drink, Teh Botol Sosro.

Sinar Sosro president director and shareholder Yoseph Sosrojoyo was quoted by Bisnis Indonesia on Tuesday as confirming the business handover.

However, he said, he was not aware of the conflict between McDonald's and Bambang.

"As a shareholder, I only signed *the agreement*, but I'm not aware of the details of the dispute," Yoseph said.

Bambang claimed he had not been notified of the plan to sell the assets under the joint company with McDonald's, PT Bina Nusa Rama (BNR).

"McDonald's has no right to sell any assets without my permission," he stated.

Under existing regulations, a local partner in a restaurant joint venture must own at least 51 percent of shares and a foreign licenser can only have one master franchisee in the country.

Another regulation states that a transfer of license to another franchisee can be made only after the franchiser secures a settlement with the previous license holder.

The term for the settlement is Clean Break, which must be carried out no more than six months after the license termination.

"They should have discussed it with me instead of transferring the license and selling the assets," Bambang said.

"They can only sell their shares, not the assets."

He added that as the sole partner in BNR, he had the first right of refusal on the divestment of shares in the company.

"There is an indication that the company is avoiding that option while discreetly selling their assets," Bambang said.

Tetty Hutapea, spokeswoman for Bambang's legal team, said the lawsuit was seeking an annulment of the sale of assets, or a settlement for losses incurred.

"We have calculated the financial losses and we will reveal the value in court," she said.

Indonesian Franchise Association chairman Anang Sukandar said a foreign company could give a license without having a joint venture with a local partner.

"I think they would prefer this to making a joint venture, because the latter would mean they have less control over their local counterpart," he said.

The franchise association, Anang added, was not involved in any way with Bambang's dispute with the fast-food company.

"He is not one of our members," he pointed out.

The problem with McDonald's adds up to the financial turmoil Bambang is currently facing following the freeze of Bank IFI's assets by the central bank.

As one of the shareholders in the bank, he is tied to a portion of liability that amounts to Rp 650 billion (US$63.7 million).