Franchise

Franchise Agreement & Registration Services Malaysia

Franchising of IP Business in Malaysia

Unlike traditional Licensing where IP owners merely grant their rights to a third party for the usage of their IP rights with reasonable controlling power without encroaching upon the legal framework of a Franchise. The Malaysia Franchise Act 1998 came into force distinguishing the framework of conventional Licensing and Franchising where the latter has emerged as a dynamic and rapidly growing business model for brand owners in Malaysia. As a hybrid of entrepreneurship and established business systems, franchising in Malaysia has been particularly appealing to small and medium enterprises (SMEs), aspiring business owners, and international brands seeking regional expansion. However, such benefit also garner equivalent challenges and formalities.

Market Overview

Malaysia’s franchise industry has grown significantly over the past decades. With a well-diversified economy, rising middle class, and increasing consumer spending power, the country provides fertile ground for franchise operations. As of recent statistics from the Ministry of Domestic Trade and Cost of Living (KPDN), the former governing Ministry, there are over 1,000 registered franchise brands in Malaysia, spanning sectors such as food and beverage (F&B), education, retail, health and wellness, and services. The governance of the Franchise Registry later shifted to the Ministry of Entrepreneur Development and Cooperatives (KUSKOP).

Till date, the F&B sector remains the largest and most popular segment, and the Ministry has been emphasising the need to register one’s business model before it could be officially and publically promoted and marketed as a Franchise. It is worth noting that a Licensing relationship could still be deemed by law as a franchise, notwithstanding its registration status, where brand owners may be liable under the Franchise Act 1998 should he/she is found guilty.

Legal Framework of Franchise in Malaysia

Malaysia has one of the most structured legal frameworks for franchising in Southeast Asia. The Franchise Act 1998 (amended in 2012 and 2020) governs the registration, regulation, and enforcement of franchise practices in the country. Key requirements under the Act include:

Mandatory registration of both franchisors and franchisees with the Registrar of Franchise.
Disclosure of the Franchise Agreement and Franchise Disclosure Document (FDD).
A minimum cooling-off period of seven days for potential Franchisees to review the agreement.
Local Franchisees must receive training and support from the franchisor.

This regulatory framework provides transparency and legal protection to all parties involved in the franchise relationship.

Opportunities for Growth Franchise Business in Malaysia

Several factors make Malaysia a strategic market for franchise growth:

Geographic Location: Positioned at the heart of Southeast Asia, Malaysia serves as a springboard for regional expansion.
Multicultural Demographic: Malaysia’s ethnic and cultural diversity allows for a broad consumer base with varied tastes and preferences.
Government Support: The Malaysian government actively supports franchise development through grants, training programs, and incentives under bodies like Perbadanan Nasional Berhad (PERNAS).

NBS has started its venture in providing preliminary advice for business and brands owners alike pertaining franchise registration in Malaysia including preparing and drafting of prerequisite documentation as well as aiding potential Franchisors in discovering the possibilities of turning existing licenses into a more safeguarded franchise.