The Malaysian franchise industry has grown significantly in recent years and many local brands have expanded internationally. However, the government aims to further develop the industry by increasing awareness, education, and Bumiputera participation. A new National Franchise Blueprint will provide strategic direction for the industry until 2020, focusing on increasing the number of traditional businesses transforming into franchises. It will also address laws and support services to better assist entrepreneurs. Additionally, a new Franchise Academy aims to enhance professionalism in the industry through training programs.

1. Special Supplement DECEMBER 18 - DECEMBER 31, 2010
www.malaysiasme.com.my
FRANCHISE
Taking the lead in franchise development
While it has been an encour- under the Tenth Malaysia Plan purely income economy and achieving devel-
to sustain the growth of the franchise oped nation status.
aging year for the country’s industry. The minister explained that this
growing franchise industry, “We recognise that being a young sec- proven business model is best suited to
tor, a lot still needs to be done to edu- those venturing into their first business
2011 promises to be even cate both the general public and aspir- enterprise. “Be it for our youth, women
better with several targets ing entrepreneurs on what franchising or even for working professionals keen
set in place for the year. is about and the benefits it offers. There to be their own masters, franchising en-
is still a considerable lack of awareness ables a business to be up and running
CHRISTOPHER TAN caught of the franchise system and the govern- without much hassle and reduces the
up with the Minister of Do- ment programmes to develop the in- learning curve of being an entrepreneur.
dustry, including the training courses, “The franchisor will provide a set of es-
mestic Trade, Co-operatives which are readily available. tablished systems and operational
and Consumerism to find out Ismail Sabri
launching the “The government plac- processes along with manage-
how he is spearheading this Franchise Expo es great emphasis on ment expertise and guidance
held recently in getting our youths to ensure that the franchisees
evolution. Subang and graduates to are able to run and operate
T
consider fran- the business. All you need
he country may be a relative Trade, Co-operatives and Consumer- chising as a via- is the passion and commit-
greenhorn to franchise com- ism to evaluate the Franchise Develop- ble career option ment to succeed.”
merce, which was formalised ment Programme between 2006 and after they com- Long-term commitment
less than two decades ago, 2008 showed that the franchise industry plete their stud- is one crucial quality that Is-
but there are already many Malaysian has tremendous potential. From just 330 ies,” said Ismail mail Sabri and his team hope
brands that have made their mark in the franchisors, more than RM10.22 billion Sabri, adding that to inculcate and nurture in the
international arena. in turnover was reported. This figure this was aligned to coming year. Citing franchise
Names such as Nelson’s, Daily Fresh, does not include the contribution from the drive towards trainees who drop out of the
Marrybrown Fried Chicken, Smart their franchisees. becoming a high- franchise programme under
Reader, Juke Box, Q-Dees Worldwide “The franchise industry, especially the Franchise Development
and Secret Recipe are quickly becom- this year, has expanded at a very en- Programme, which aims
ing household names in the four corners couraging pace. There were 61 new lo- to develop SMEs in the
of the globe from Indonesia, Bahrain, cal franchise brands registered in 2010 commercial, ser-
Egypt, Jordan, Lebanon, Oman, Qatar, compared to only 28 last year. To date, vices and
Turkey, Saudi Arabia and Kuwait right 29 local franchise brands have brought
up to Russia, the United Kingdom, Bru- their products to 49 overseas markets.
nei, China, Australia and New Zealand. We must continue to get our local
“The franchise trade is a compara- brands out there in the international
tively new business method that was markets as this will further boost our
formally introduced in Malaysia back in global economic standing,” the minis-
the early 1990s. Despite this, you can see ter stressed.
that many of our home-grown franchise
brands have emerged in recent years Future with youths
and some have already become industry In order to get Malaysian brands out
players globally,” explained the justly there we first need to develop solid
proud Domestic Trade, Co-operatives foundations at home. Since establish-
and Consumerism Minister, Datuk Seri ing the Franchise Development Di-
Ismail Sabri Yaakob. vision in 1992 to oversee the over-
The country has undoubtedly made all development of the industry,
tremendous progress as 482 franchise the government has been putting
businesses have been registered with in great efforts to spur the growth
the ministry to date. Of this total, 332 of the sector. It allocated RM20
are local franchises and 150 are foreign. million under the Ninth Malay-
A mid-term impact study conducted sia Plan and another RM15 million
this year by the Ministry of Domestic has been approved for 2011 alone
Preview of the proposed National Franchise Blueprint
• Formulated by the Ministry of Domestic Trade, Co-operatives, and Consumerism, Perbadanan
Nasional Bhd and the Malaysian Franchise Association.
• Covers the strategic direction and development of the franchise industry.
• Assesses the current status, performance and effectiveness of existing policies.
• The blueprint will focus on increasing awareness and encouraging entrepreneurs to choose a
franchise as a business.
• A road map of the future of the franchise industry is incorporated in the blueprint, with particular
emphasis on the development of the industry.
• Focus will also be given to Bumiputera participation in the development of the franchise industry.
• In addition, the Franchise Act 1998 and the rules of other laws will also be addressed in the
franchise development plan to make it more business-oriented and facilitate the participation of
entrepreneurs in the franchise industry. Minister of Domestic
• Issues relating to finance and support services as well as assistance by the government will also Trade Co-operatives and
be addressed in the Franchise Development Plan, to better assist and support the participation Consumerism, Datuk
of entrepreneurs in franchise businesses. Seri Ismail Sabri Yaakob
• Scheduled to be launched in the first quarter of 2011.
> TURN TO PAGE S2

2. S2 DECEMBER 18 - DECEMBER 31, 2010
FROM PAGE S1
Ismail Sabri (right) present-
List of approved franchises registration by sector
industrial sectors, or franchisees who ing the Franchise License
fail to give their full commitment to the to one of the new franchises List Sector Total approved %
franchise business after the initial en- approved by the Ministry
thusiasm has died, the Minister aims 1. Food & Beverages 148 31
to ensure that the new batch of partici- 2. Clothing & Accessories 70 15
pants selected for the programme will 3. Services & Maintenance 50 10
have the passion and commitment to be 4. Learning Centre & Nursery 57 11
true franchise entrepreneurs. 5. Health & Beauty Care 47 10
“Even though we currently record a 6. Convenience Shop & Supermarket 13 3
failure or dropout rate of less than 10%, 7. IT, Telecommunication & Electric 26 5
we want to further reduce this figure. 8. Other Businesses 71 15
In the past, there were those who were
unemployed who decided to pursue Overall total 482 100
franchising only as a last resort or mere-
ly as a stepping-stone to other career
opportunities. cies and directions to address issues per-
“After being trained and guided to set full commitment and focus of its own- taining to development and outline the Franchisor advantages:
• Opportunity for business expansion without
up their franchisee business, including ers; be they franchisors or franchisees.” action plans to spearhead the franchise utilising own capital.
loan approval, they either discontinued In order to nurture more dedicated en- industry and place it on a level playing • Benefits of economies of scale.
the venture or left it to others to manage trepreneurs, the ministry is taking steps field with other developed nations. It is • Risk sharing.
when they found full-time employment. to catch the interest of Malaysian youth also aimed at enabling Malaysia to be- • Obtaining wider business feedback.
• More concentration on research and
Unfortunately, this shows that they at an early stage along their academic come a regional franchise hub by 2020. development.
were not serious in becoming entrepre- path. Instead of waiting for students Once unveiled, the blueprint is ex-
neurs from the start,” lamented Ismail to complete their studies, the team is pected to chart the franchise trade’s Franchisee advantages:
Sabri, noting that this may add to the looking to create awareness and interest contribution to the country’s retail sec- • Reduces business risk.
banks’ non-performing loans as some among those still at university. tor. As it stands, the franchise sector • Opportunity to promote goods or services
do not clear their debts before exiting “If we are able to implant the desire already accepted by the public.
contributes about 5% to the country’s re-
• Benefits of economies of scale.
the business. and passion to become an entrepreneur tail sector revenue. This is a far cry from • Efficient guidance on business manage-
However, he was quick to point out early, we will be able to ensure that more advanced nations such as the US ment.
that there are two sides to every coin. those who are going to be a part of the where 40% of retail revenue comes from • Continuous support from franchisor, gov-
It is not just the franchisee who needs industry are really serious about doing ernment agencies and financial institutions.
franchising.
a change of mindset as the perception well. We are focusing on quality and “The blueprint will ensure that the
of a franchisor is also equally impor- the development of the industry as a country has a clear direction for the when they have signed up as franchi-
tant. “Franchisors must fully under- whole instead of merely hitting a certain franchise industry from now until 2020. sees with the franchisors, and NOT to
stand that the conceptual basis of the required number of franchisees each By having more business-oriented poli- apply for approval.
franchise model is ultimately to expand year,” emphasised the Minister. cies and specific measurements in place “Currently, according to the annual
the business and promote their brand. such as initiatives to increase the number reports received from franchisors there
We have cases of franchisors who were Getting it right of traditional businesses transforming are 6083 franchisees. But it is estimated
only interested in collecting fees from The methods in which these changes their business operations into franchis- that the figures are very much higher. It
their franchisees, while neglecting their will be implemented within the indus- es, expanding through more franchisee is hoped that with the proposed require-
resposibility in ensuring the viability of try will largely depend on the proposed outlets, creating more franchise oppor- ment for franchisees to register with the
the business, and failing to fulfill their Franchise Blueprint, which is expected tunities, offering employment opportu- Registrar, including ensuring franchi-
obligation to provide support to their to be finalised by year end and come nities and increasing sales turnover, we sors submit more timely and accurate
franchisees. These are some of the com- into force in the first quarter of 2011 as feel that we can elevate the sector to be- reports as required under the Franchise
mon factors leading to the failure of a well as the proposed amendments to the come a major industry and contributor Act, the data will be more accurate and
franchise business. Like any other busi- Franchise Act 1998. to the economy, both domestically and will enable the government to plan
ness, a franchise business requires the The blueprint will establish new poli- internationally. We would also be able to more effective programmes to address
boost the participation of entrepreneurs issues and support the growth of the in-
in the industry,” enthused Ismail Sabri, dustry. “
adding that the blueprint will also call The newly established PNS Academy,
for banks and financial institutions to scheduled to be operational in January,
be more supportive of those entering a will conduct short courses and certifica-
franchise business. tion-level progarmmes to train an initial
Another key factor, which is expected
batch of between 100 and 200 would-
to boost productivity within the industry,
be entrepreneurs and industry players.
is the proposed revision of the Franchise
Perbadanan Nasional Bhd (PNB), an
Act to make it mandatory for franchisees
agency under the ministry, is working
to register with the ministry in order
with University Utara Malaysia to fi-
that their rights may be better protected.
nalise the modules.
Under the Act, which was introduced to
“I believe we may be the first in the
regulate the franchise industry, it is cur-
rently mandatory for every franchisor in region to have such an academy for the
Datuk Sri Ismail Sabri (2nd from left) holding a press conference
flanked by his two deputies; YB Datuk Tan Lian Hoe and YB Datuk Hjh. the country to apply and be licensed as a franchise industry. The establishment of
Rohani Bt. Hj Abd. Karim, the Secretary-General; Datuk Mohd. Zain bin franchise business. It is not a requirement the academy is to enhance professional-
Mohd. Dom and the acting Chairman of MFA; Abdul Malik Abdullah.
that franchisees do so as well. ism among players in the franchise in-
When asked if this amendment would dustry including both franchisors and
discourage potential franchisees, the franchisees, and to build a bigger pool
What’s franchising? Minister, who has personally engaged of trained and qualified franchise prac-
with industry players through dialogues titioners and professionals. The main
Franchising is “method of practicing and using another person’s philosophy of business. The
franchisors authorise the proven methods and trademarks of their businesses to franchisees for a to get their feedback on how the sector is learning points will revolve around
fee and a percentage of gross monthly sales.” faring, was emphatic that it would not. teaching the fundamentals of franchise
Expanding on this, a franchise is a business strategy that a company can use to expand its management,” revealed Ismail Sabri.
business and brand to distribute its products or services through a third party who invests in the
“Not at all. On the contrary, it would
brand and business. The third party or franchisee operates and manages the franchise business be helping them even more as with this
in a specified location agreed by the franchisor and franchisee, using documented operations, initiative, we will be able to monitor and Standing out in a crowd
training, trademark and brand developed by the franchisor. support their progress throughout their Although Malaysian franchises are
In exchange, the franchisee pays an initial franchise fee and other agreed and approved royalty
journey, including having more effctive spread across a range of industries in-
fees to the franchisor, besides investing the initial capital required to start and operate the busi-
ness. A franchise offers entrepreneurs the opportunity to participate in a business that has been programmes that will enhance their cluding education, fashion, footwear,
proven effective time and time again. competencies and capabilities. We want accessories, beauty and healthcare, ho-
Typically, franchisees also receive assistance in other areas such as buying equipment, training to be able to help them through early in- tels, eye-care, and travel services, it is
personnel, locating reliable suppliers, marketing their products, and maintaining accurate financial
information. A franchise is typically a low risk business as it has a proven business model and
tervention initiatives if they experience the food and beverage (F&B) sector that
track record. problems. The franchisees are only re- garners the most interest, as it compris-
quired to fill in a simple form to register > TURN TO PAGE S3

3. DECEMBER 18 - DECEMBER 31, 2010 S3
FROM PAGE S2 exposure to risk in relatively unfamil- our goals as a developed and economi- “There is no doubt that franchising in
es over 30% of the franchise business iar or diverse markets; yet is still able cally vibrant nation. Malaysia is set to grow significantly as
models. to have some measure of control over “I hope more successful entrepreneurs the preferred way of doing business,”
Ismail Sabri stresses that while it is the business and brand,” the minister will expand their business and brand summed up Datuk Seri Ismail Sabri Yaa-
good for the F&B industry to have many reiterates. through franchise because it’s the fast- kob confidently.
local brands in the market, it is impor- est and most effective way to expand.
tant for the country’s long-term sus- A Minister’s aspirations for the This will also create a large pool of ca- Learn about the Franchise Act and how it
tainability that entrepreneurs should industry pable and professional entrepreneurs develops and creates a vibrant and secure
venture into other industries that can When asked about his expectations of amongst the business community. business environment for the industry;
help the country carve a niche market the franchise industry, Ismail Sabri has “I envisage that the franchise industry where the interests of both franchisors
presence. this to say: “I hope that with the pro- will ensure and increase domestic in- and franchisees are protected, in the next
“At times, we will not be able to com- grammes initiated and implemented by vestments in the country; in which suc- issue.
pete with other nations that are more the Government, the local franchise in- cessful franchises will provide oppor-
advanced in technology or have more dustry can really take off at a faster pace tunities to local entrepreneurs to invest
resources. But what we can be very and help the nation leapfrog towards and obtain better returns.
good at is to be innovative and different
from the rest. Malaysia has one of the
most respected halal certifications and All you need to know about franchising in Malaysia
standards in the world, so we should
leverage on that strong reputation and operating for at least 3 years and have a well
promote our halal franchise brands organised, profitable as well as successful
business;
overseas.” • Only those businesses that are against reli-
When it comes to promoting the fran- gious beliefs and culture are not allowed.
chise model, the ministry has stepped
up initiatives to reach out to aspiring 7. Why is the Government serious in devel-
oping the Franchise Industry?
business owners. From just focusing on • The Government supports and facilitates busi-
Kuala Lumpur, there are now six zones Ismail Sabri (centre) witness- nesses in expanding through the franchise sys-
established by PNB located throughout ing the signing of the franchise tem including promoting and developing entre-
the country to spur the uptake of fran- agreement between a franchise preneurs through franchising;
owner and one of its franchisees • Franchise Industry is one of the key industries
chises amongst the smaller townships, to be promoted as a high-value industry that
including those in East Malaysia. would be able to help the nation achieve high-
Next year will also see an increase in 1. Why franchising ? chise brands were registered compared to only income status as specified under the New Eco-
• Franchising allows would-be or new entrepre- 28 in 2009; nomic Model (NEM);
promotional activities and participation
neurs as franchisees to start their own busi- • Ministry expects more businesses to register • Franchising also indirectly promotes Intellec-
in exhibitions and trade fairs for local ness using the marketing and brand name of with the support of the Government under the tual Property development as branding, trade-
franchise brands hoping to penetrate an established business; Franchise Development Programme, including mark and patents are all part of franchising;
regional emerging markets in Asean as • The third party or franchisee operates and the launch and implementation of the Fran- • A National Franchise Blueprint is being formu-
manages the franchise business; as agreed by chise Blueprint; lated. It will set the new policies and directions
well as China, India, and the Middle
both the franchisor and franchisee in a specific • A mid-term impact study to evaluate the Fran- including action plans to meet the changes and
East. location, using the documented operations, chise Development Programme between 2006 current needs in the fast paced global economy;
“Malaysia, possibly the only country training and trade mark / brand developed by and 2008 has shown that the franchise industry • The Ministry is also in the midst of review-
in this region to have a Franchise Act, is the franchisor; has tremendous potential; from just 330 fran- ing and amending the Franchise Act 1998 to
• In exchange the franchisee pays an initial fran- chisors, more than RM10.22 billion turnover ensure that the Act is relevant to the current
one of the few governments around the
chise fee and other agreed and approved roy- was reported; business environment and will facilitate faster
world to provide full support to create alty fees to the franchisor; • It is expected that an impact study on the growth of the industry;
a conducive environment to develop a • The benefit to the parent company or fran- 5-year RMK9 that will be conducted will show • The amendments will, among other things, provide
robust local franchise industry. This re- chisor is that it costs them much less to expand that the contribution from the industry to the greater protection for both franchisors and fran-
through franchising while allowing independent GDP is very much more. chisees, and incorporate a dispute mechanism;
flects our seriousness in building this
business owners to manage their stores.
industry and transforming it into an • It’s like having a CEO at every store location 4. Why are businesses going for licensing 8. What are the programmes undertaken by
important and dynamic contributor to nationwide, since business owners are much instead of franchising? the government for the franchise industry?
the national economy and the country’s more likely to care for their stores and busi- • They may not understand the benefits of the • The programmes aim to disseminate all the
nesses than salaried store managers. franchise system; information about franchise potential and to
growth,” said the Minister.
• Franchising also became very popular with • They also may not know about the benefits of equip local entrepreneurs about the know-how
Ismail Sabri advised those interested new entrepreneurs and small business owners the franchise system, and the support available of franchise business;
in franchising to embark on it with pas- who saw franchising as a less-risky entrance for the franchise industry; • The programmes implemented in RMK9
sion and discipline. “SMEs who are op- into owning and running their own business. • In licensing, there is usually no training compo- amongst others are :
• Most franchises can be purchased for far less nent or product development strategy and there • Franchisor and Franchisee Development Pro-
erating successful businesses and new
than starting one’s own business and since you is limited operational and marketing support; grammes;
entrepreneurs alike should take a seri- are the owner, you have direct management • Unlike licensing where there is no specific Act • Franchise Training
ous look at franchising as an optimum over the operation of your franchise. to protect the business or brand owner, fran- • Franchise Promotion
way to expand their brands or invest in. • Franchise business is typically a low risk as- chising is protected under the Franchise Act • International Franchise Expansion Ininitiatives
sociated business as it has a proven business 1998 which protects the rights of the franchisor • Research & Development and
Franchising in other developed coun-
model and track record. including the IP rights; • Mediation
tries is very popular and continues to re- • Some businesses avoid franchising their busi- In RMK10, we have added new programmes
cord high success rates, as clearly shown 2. Why franchise your business and how ness with the false view that franchising un- over and above the existing programmes such
by many of the top foreign brands in will franchising benefit parent business der the Act is more tedious and cumbersome. as competency and enhancement programmes
owners or franchisors? But in fact, there is a specific Ministry which is to build strong local franchises, a soft loan
Malaysia which are successful fran-
• It is a business strategy that a company can use MDTCC and a division and financing agency scheme for franchisees and extensive promo-
chises. I am confident that the industry to expand its business and brand through a third that will oversee, develop, support and ensure tion and marketing ptogrammes nation wide and
will help propel us towards becoming a party who invests in the brand and business; the growth of the industry. overseas to expand the Malaysian franchises
high-income nation by 2020. • Quickest way to expand & promote your busi- worldwide.
ness & brand without using your own capital; 5. What are the challenges in a Franchise
“As more Malaysians become aware
• Many franchise businesses have proven to be Business? 9. What is your advice to keen entrepre-
of the potential and advantages of fran- extremely profitable for their owners, especially • The lack of knowledge and in depth under- neurs who want to venture into the fran-
chising, not only in terms of expanding if you own an established brand, as the brand standing of franchising; the perception of banks chise business.
their business and brand through third is marketed through more outlets and man- on the viability of franchise businesses espe- • Every business and even a franchise business
aged by entrepreneurs who themselves have a cially local franchises and the ability of new en- requires entrepreneurs who are committed,
party investments in their business as
stake in the success of the business. trepreneurs, are all obstacles that need to be passionate and disciplined.
franchisees, and hence reducing the overcome. The biggest challenge is of course • The government is very committed in ensuring
franchisor’s business risk, I believe that 3. What is the landscape of the Franchise access to financing for potental franchisees; the growth of the industry as it is identified as
we will be able to increase domestic in- Industry in Malaysia? • For the Government, the challenge lies in en- one of the industries which is in line with and
• Franchising in Malaysia began in the early 1990s; hancing the capability of local franchisors to will greatly contribute to government initiatives
vestments in the country and also raise
• The industry is still in the developing stage as manage their expanding businesses well and such as the New Economic Model that includes
the professionalism and service quality many in Malaysia still do not know or fully un- provide good service, training and guidance to the Economic Transformation Programme
of businesses. This is because franchis- derstand franchising and its benefits to their their franchisees including maintaining strong (ETP) and RMK10.
ing, besides other factors, is all about businesses; and long-term franchise relationships;
• As of Dec 1, 2010, there are 482 franchise 10. Where can I get more information or as-
systems, precision management, service
businesses registered; 6. Can all businesses be franchised? sistance on franchising?
quality, consistency, brand building and • 332 are local franchises and 150 are foreign • Yes. All businesses that are successful, have All interested parties can access information
recognition. franchises; a good track record and are well organised about franchising and government initiated pro-
“It is also important to emphasise that • From these local franchises, 29 have expand- with comprehensively documented processes, grammes at the ministry’s website and franchise
ed their franchise overseas in 49 countries; operations and training are encouraged to ex- portal at
franchising is a proven and recognised
• The industry, especially this year, is expanding pand through franchising. www.kpdnkk.gov.my or www.franchisemdtcc.
way to venture overseas as by choosing at a very encouraging pace; 61 new local fran- • To be licensed, a business has to have been gov.my.
to franchise, the company minimises

4. S4 DECEMBER 18 - DECEMBER 31, 2010
New look for Franchise Malaysia
letters of ‘F’ and ‘M’, which to-
gether form the acronym for
‘Franchise Malaysia’
• The orientation of the logotype
takes the shape of a stencil / chop
/ stamp symbolising the ‘endorse-
ment’ which means to meet or
pass high quality standards. The
‘Swosh stroke’ in the letterform
Franchise Malaysia Logo ‘M’ takes three representations:
• The idea was mooted by Datuk • Simplification of the identity of
Seri Ismail Sabri Yaakob himself the Ministry of Domestic Trade,
to rebrand the franchise industry ternational Malaysia 2010 (FIM 2010) brand, and build confidence in local Co-operatives and Consumer
by giving it a unique and recog- in July 2010. franchises. Affairs,
nisable image in Malaysia and • The launch of of a national logo for the • The emphasis of the ‘approval’,
overseas. franchise industry is essential and in and Malaysia’s commitment to
• A logo designing competition line with the development of the fran- Designer develop the franchise indus-
open to all citizens of Malaysia chise industry in Malaysia. • The Malaysia Franchise logo design try as a highly competitive and
was held. • The logo will be the special identity for competition was won by Fauzan Mus- credible industry.
• Minister of Domestic Trade, Co- Malaysian franchise businesses and to taffa, a lecturer in the Multimedia Uni- • The letters “Malaysian Fran-
operatives and Consumerism, enable the public to identify business- versity, Cyberjaya. chise” enable easy recognition
Datuk Seri Ismail Sabri Yaakob es that practice the franchise system of the Malaysian industry.
launched the official Franchise and are licensed by the Government. • The colour scheme (blue and yel-
logo in conjunction with the open- • The Malaysian franchise logo is ex- Logo Rationale low) of the logo re-emphasizes
ing ceremony of the Franchise In- pected to project the image and • The logo is created based on the two the colour identity of the Ministry.
It’s all about franchising
discretion of the licensor in the licens-
ing contract.
• Right to territory: It is compulsory for
T
the franchisor to determine, inform
he Ministry of Domestic Trade, and guarantee the right to specific
Cooperatives and Consumer- territory or location for the operation
ism is responsible for oversee- of franchisee businesses, which will
ing the development of the fran- ensure that no other franchisee or the
chise industry in Malaysia. franchisor can operate the business in
It is often difficult for SMEs to estab- the specified territory of the franchi-
lish a good reputation and steady client see. In the case of licensing, licensors
base at the inception of their companies, are not obliged to do the same.
and with franchising, these problems • Operation Manuals: To be registered
are alleviated. For entrepreneurs look- as a franchise in Malaysia, the would-
ing to expand their business portfolio be franchisor is required to prove the
without the hassle of starting a business viability and profitability of his busi-
from ground up, franchising is a viable ness and to have a set of comprehen-
and profitable alternative. sive business operation systems. This
professional training regional centre, the laysia to register with the Franchise in essence means that the franchisor is
Initiatives to educate franchise owners Ministry is looking to develop a sub-in- Registry at the Ministry of Domestic required to have manuals for opera-
While the franchising business is flour- dustry on franchise training, which will Trade, Cooperatives and Consumer- tions and training that will ensure the
ishing in Malaysia, the Ministry is still offer training to both the local industry ism according to the Franchise Act franchisee is able to deliver the same
striving to strengthen the resilience of and emerging markets in Southeast Asia. 1998, while a licensing business on service or products as the franchisor.
the industry through many initiatives. Also in the pipeline is the initiative to the other hand does not have an Act Licensing agreements are not required
The Ministry is aiming to develop and build up a franchise consultancy sub- or a specific governing body to pro- to have a manual.
expand educational franchise manage- industry by training competent and cer- tect both parties of the agreement. The Both franchising and licensing are
ment training programmes, in order to aid tified franchising consultants in order to franchise industry has the Act to en- forms of business arrangement that
franchise owners reduce risks and man- offer professional franchise consultancy sure fair trade and business practices enable entrepreneurs to operate busi-
age growth. At the same time, the train- services in Malaysia and regionally. and ensure the rights of both the fran- nesses, be it franchisors or licensors
ing programmes will help build stronger, There will be an increase in promo- chisor and franchisee. who are looking to expand their busi-
healthier and more sustainable franchise tional programmes to highlight the • Fees: It is the right of franchisors to de- ness through outside investment such
systems with professional ethical stan- potential of franchising to existing cide on the fee – including franchising, as franchisees and licensees.
dards and good business practices. business as franchisors and other tar- royalty, promotion and advertising However, licensing agreements are not
Developing certified professional get potential entrepreneurs, including fees – that will be paid by the franchi- protected as compared to franchising as
franchise training modules is another graduates, women, youth and others as see, which serves as compensation for the latter is protected under the Fran-
of the Ministry’s initiatives. This will franchisees. the brand, business operation system, chise Act 1998. This leads to a conducive
ensure that there are ample pool of support system, innovation and good- and better business relationship between
trained franchise professionals to pro- Differences between franchising and will shown to the franchisee. The fees franchisor and franchisee, which will en-
vide franchise management services licensing decided upon have to acquire approv- sure that both parties are able to conduct
to franchise owners with the skills and While most entrepreneurs have a basic al and register with the Franchise Reg- business transactions more effectively
knowledge required to ensure that the understanding of franchising, it is of- istry as part of the franchise approval and efficiently, and at the same time en-
local franchises reach a recognised stan- ten confused with licensing. The Fran- requirement. The Franchise Disclo- sure the consistency and quality of ser-
dard of excellence or to enable franchise chise Development Division provides sure Document is an official document vice at every franchise outlet.
owners the opportunity to raise their a brief overview to highlight the key that the franchisor must get approval Overall, for long-term business devel-
competency level as entrepreneurs and differences: from the Registrar and be made avail- opment and growth; franchising is the
franchisors. • Registration: It is compulsory for a able for any would-be franchisees. For preferred and most optimum business
To establish Malaysia as a certified franchise business operating in Ma- licensing, any fee charged is under the expansion model.
For financing information, go to PNS’s website at www.pns.com.my and for other information on the industry, go to the Malaysian Franchise Association’s website at www.mfa.org.my