Franchise arrangements in Malaysia are governed by the Franchise Act 1998. This act applies to the sale of franchises throughout Malaysia. Compliance with the Act and thus the need to register also covers companies previously registered under the Prime Minister’s Department or MECD.
The sale of a franchise is deemed to be in Malaysia where an offer to sell or buy a franchise:
- Is made in Malaysia and accepted within or outside Malaysia
- Is made outside Malaysia and accepted within Malaysia
- The franchised business is or will operating in Malaysia
Under the Franchise Act 1998, there are four (4) categories of registration as follows:
| Type of Franchises | Definition |
| Franchisor | A person who grants a franchise to a franchisee and includes a master franchisee and his relationship with a sub-franchisee |
| Master Franchisee | A person who has been granted the rights by a franchisor to sub franchise to another person, at his own expense, the franchise of the franchisor |
| Franchisee of Foreign Franchisor | A person who has been granted the rights by a foreign franchisor but does not sub franchise to another person |
| Franchise Broker | A person doing business as an agent or representative of a franchisor to sell a franchise to any person for a certain consideration but does not include any director, officer or employee of the franchisor or franchisee |
Application for Registration of Franchises
By virtue of Section 6 of the Franchise Act 1998, a franchisor or master franchisee is required to make an application to register his franchise with the Registrar of Franchises, Ministry of Domestic Trade, Co-Operatives and Consumerism (MDTCC), by submitting an application to the Registrar, together with the following documents and information:-
- Completed disclosure document with all the necessary particulars filled in. the format of the disclosure document is as prescribed in form BAF1
- Completed Form BAF 2 (Application profile)
- Proven and complete operation manual (Bahasa Kebangsaan / English)
- Training Manual (Bahasa Kebangsaan / English)
- Certified true copy of Registered trade mark or intellectual property mark documents with Malaysian Intellectual Property Office (MIPO)
- *if trademark/intellectual property mark has been assigned to applicant, a certified true copy of the relevant legal instrument/document must be submitted
- Certified true copy of certificate of incorporation (Form 9 or 13, 24, 44 and 49)
- Latest audited accounts (3 years) together with financial statements, balance sheet and profit and loss accounts
- 5 years franchise financial projection
- Prototype outlet/s photographs
- Brochures/pamphlets/company annual report and
- Other additional information or document as may be required by the Registrar for the purpose of evaluating the application
Section 55 of the Franchise Act 1998 provides that, franchisees to foreign franchisors are required to submit the application for registration to the Registrar of Franchise and documents with the following information:
- BAF 2 Completed (profile attached);
- Certified copy of the franchise agreement between foreign franchisors and franchisees who have signed and stamped;
- Certified copies of documents / certificate of trademark registration from the Malaysian Intellectual Property Office (MIPo);
- Certified copy of incorporation certificate (Form 9/13, 24, 44 and 49);
- Brochures/pamphlets/company annual report and
- Other additional information or document as may be required by the Registrar for the purpose of evaluating the application
Franchise Agreement
Franchise Agreement shall be in writing. The agreement should include but not limited to the following matters:
- Name / description of the product & product
- Identity franchisors / master franchise rights
- Territorial rights
- Fees
- Duties of the franchisor
- Duties of franchisee
- Right franchisees for trademark & intellectual property
Terms franchisees assign its rights
Cooling off period (not less than 7 days)
Description of the mark or any other intellectual property owned by / used in connection with the franchisor in the franchise
Type & the details of assistance by the franchisor
Franchise period (at least 5 years)
Terms of the franchise renewal
Effect of termination / expiration of
Manual operation / training
Settlement of disputes in meditation
After registration obligations
Under the Franchise Act 1998, franchisors / master franchisees who are registered must submit the following documents annually: -
Annual Report
- Number / name / address the following franchise outlet:
- Company outlets
- Bumiputera franchise outlets
- Non-Bumiputera franchise outlets
- Overseas franchise outlets
