Franchises in Malaysia: Opportunities & Registration Process

If you are new to entrepreneurship, starting a business from scratch can be daunting, especially if you are risk averse. An alternative to incorporating your own business in Malaysia is to purchase a franchise and set up a company that already has established its brand recognition.

The franchise industry in Malaysia is one to watch. As reported by The Star, it is expected that franchise sales will increase from RM14.65 billion in 2020 to RM22.66 billion in 2025. The demand for franchise businesses has been slowly increasing, and now is the right time to start your franchise in Malaysia if you have plans to do so.

Best Franchises in Malaysia

There is an abundance of opportunities to buy and set up your own franchise business. Here are some of the best franchises in Malaysia that you can consider:

While these are the popular franchises to consider, there are plenty of other businesses across the industries that you can search for.

Here are ways on how you can find the franchise opportunities in Malaysia:

• Search Engine
• Make a list of brands that you would like to explore the franchising option and look at their websites for opportunities or write in to them
• Leveraging on franchise aggregator platforms like iFranchise

Malaysian Franchise Act

All franchises in Malaysia are governed by the Malaysian Franchise Act 1998. The Franchise Act regulates the franchising industry with regard to the franchise agreements and the official registration of the franchisor and franchisee. Any official franchise advertisements and sale of franchises are also governed by the Act.

Here are some of the terms under the Act:

• The franchisor shall grant the franchisee the rights to use the trademark or any other intellectual property associated to the franchise
• A franchisor possesses the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the franchise system
• A franchisor shall provide assistance to a franchisee to operate his business, such as the provision or supply of materials and services, training, marketing, and business or technical assistance
• The franchisee may be required to pay a franchise fee or other forms of compensation to purchase the franchise

The full Malaysian Franchise Act can be found here.

Things to Consider Before Starting a Franchise in Malaysia

Before you start a franchise in Malaysia, there are many considerations and questions that you will need to note and ask yourself.

1. How much are you willing to put into your franchise business?

The most important step is to decide how much you can afford to set up a franchise in Malaysia. As you would expect, bigger brands would require a higher franchise fee (e.g. Sakae Sushi) and certain industries that require a lot of operational setup such as gyms (e.g. Anytime Fitness) will have a high initial capital.

2. How densely populated or easily accessible is your ideal franchise business currently? Is there an oversupply of such businesses in the area that you are looking to set up?

The next question will look into the probability of success for your franchise business. Once you have decided on the brand, do research on its locations and check if there is any competition within the area.

Understanding your target audience in this instance would be crucial for a strategic location for business setup.

3. Are there any clauses or terms of agreement that are grey?

You should ask yourself the final question: if there are any grey areas in the franchise agreement? In some cases, certain clauses or terms intentionally leave room for different interpretations. This could be very detrimental to your long-term strategy as you will be bogged down in dealing with these complications or legal issues.

Before signing, ensure a legal professional reviews your franchise agreement to ensure both parties properly understand every term. If you need contract review, reach out to us, and our in-house legal consultant can assist.

How to Register a Franchise Business in Malaysia

After making the decision to start your franchise in Malaysia, the next step is for you to get it through compliance to operate as a legal entity.

Stage 1: Registration with Registrar of Franchise (ROF)

Depending on whether you are looking to operate a franchise of a local or foreign franchisor, the registration is different.

1. Malaysia franchise registration of a local franchisor

Registration must be submitted to the ROF within 14 days from the date of the signed franchise agreement.

2. Malaysia franchise registration of a foreign franchisor

Registration must be submitted to the ROF prior to the commencement of the franchise business.

To register a franchise with the ROF, there is a list of documents that would be required. This is to be submitted by the franchisor and they include:

1. Franchise agreement
2. Operation manual
   • Training manual
   • Certificate of incorporation
   • Forms 24 and 49
   • Form of annual return
   • Last 3 years of audited balance sheet and profit & loss account
   • 5-year financial projection for the franchise
   • Registered Trademark filed with MyIPO (must be certified true copy)
   • Franchisor’s organisational chart with names and positions of key stakeholders
   • Franchisor’s company brochures
   • Photographs of outlets (can be prototypes)
   • Bankruptcy search results for directors
   • Business proposal outlining competitive advantages, vision, strategy, etc.

The process of registering a franchise with the ROF can take between 2 to 6 months.

Stage 2: Registration with Suruhanjaya Syrikat Malaysia (SSM)

All companies in Malaysia are required to register with the SSM. This is to officially operate your franchise and have your names as the shareholders of the company.

We have listed down the process to set up a private limited company in Malaysia in another article – you can read about the process, requirements, and documents needed here.