We have provided the information in this article in order to enable anyone to learn more about starting a franchise business in Malaysia.
Definition of a Franchise Business
A franchise business is a type of business in which the owners of the business, also known as ‘franchisors’ sell the rights to their business logo, name, and model to third parties. The third parties are known as franchisees. Legally, a franchise includes a license granted by a business owner to another party. Generally, the franchisor licenses a business including its method of operation and its system to the franchisee.
Role of the Franchisor
The franchisor is to grant the franchisee with as much support as the franchisee requires. The franchisor is also expected to take control over some of the franchisor’s operations to protect their brands and ensure that the franchisee operates in line with the business motives and standards which are in place. The franchisee is also to pay a one-time franchisee fee at the beginning of the agreement to the franchisor as well as an agreed periodic royalty fee.
However, the franchisor takes little or no role in the day-to-day operation of the franchisee’s business because the franchisee is usually an independent business operator and not a joint partner. Therefore, although the franchisor gives basic directions on standards of the company, the franchisee is nevertheless free to hire, compensate, and set rules on operations independently. The rate of pay and working hours are also under the control of the franchisee.
Why One Should Start a Franchise Business in Malaysia
Starting a business in Malaysia might sometimes be difficult, especially if the new business owner is starting a business in the county for the first time. There are many elements involved in starting a new business in Malaysia. The owner of the business will have use certain amount of capital to permit it to operate in the best manner possible. Furthermore, branding a new company is not easy; the failure to brand the company appropriately might lead to the failure of the company. Earning the consumer’s trust product is therefore a challenge to those running a business; however, it has been proven that such is an easier task if franchise businesses are involved. Therefore, franchising a business has numerous benefits to both the new business start-ups and franchisor alike. There are also several other advantages which may be claimed by franchise businesses in Malaysia.
The business which is selling its operational rights and name will have expanded its brand without necessarily spending additional amounts of money. Due to the fact that the franchisee is an independent operation unit, its management funds will not be from the brand company. Therefore, the franchisor may expand business operations without using up large amounts capital. Franchising therefore helps entrepreneurs in Malaysia to expand without the risk of excessive debts or financial struggles.
It is not always easy to hire suitable managerial figures in any company. However, starting a franchise business in Malaysia will help provide managerial roles to more deserving figures. Since the new unit is an independent entity which is managed by the business owner, the owner can then make suitable managerial plans which will facilitate the long-term business success of the franchise business in question.
Long-term Customer Commitment
Long-term commitment is a rare trait which is not easy to find among customers. However, those who are willing to give their commitment to a particular company will not easily give up or walk away even when the company and its brand go through difficult times. Long-term customer commitment can be fostered when the franchisor and franchisee work together to achieve outstanding results for the company
Improved Operational Quality
Business owners are tasked with employing better employees and producing quality services and goods in order to retain their customers. The desire to have success will eventually lead to success in the operations of the business because the manager will hire qualified personnel.
In order to make a franchise business successful, franchisees must be creative and use methods which will bring about business prosperity and success. Franchisors and franchisees alike may contribute important input for this matter.
Starting a Franchise Business in Malaysia
Starting a franchise business has become common in Malaysia because it is one of the ways of reducing risks associated with starting new start-ups. The government of Malaysia has also projected that the franchise business will contribute approximately 94% of the country’s total GDP by the year 2020. The Malaysian government therefore works towards ensuring that Malaysia becomes the region’s leading franchise hub. However, before any aspiring owner of a franchise business in Malaysia takes the step to do so, there are certain matters which must be addressed before doing so.
Attend Organized Franchise Events
Before starting a franchise business in Malaysia, it is of utmost importance that the owner-to-be understands all the requirements of a franchise business in Malaysia as well as how one is to be run. Attending organized franchise events will offer many opportunities to meet franchisors looking for franchisees. It will also allow one to interact with franchise mediation companies as well as regulatory bodies such as the Malaysian Franchise Association.
The events can help you network further and gather all the necessary information first hand as well as meet various offers. However, you should be careful as every franchisor agent will be selling out and you might be dubbed to entering into a not good one. Hence, engaging a professional will enable you realize your potential and the best option.
Speak to Consultants and Lawyers
There are many consultants and lawyers in Malaysia who specialize in the setup of a franchise business. Thus, it is not necessary to consult one’s personal lawyer. This is because it is both possible to meet and consult an independent franchise consultant. Independent franchise consultants specialize in franchise agreements; thus, they are able to contribute much to the success of a franchise business.
Creating a Business Plan
The next important step in starting a franchise business in Malaysia is that of the creation of a workable business plan. The plan will involve the future expectations which will serve as the company’s blueprint. This is where information gleaned from prior consultations comes in; such information will serve to provide the estimated amount of money required to help make the creation of the business plan clearer and more specific.
Filing of the Franchise
At this point, there is just one step which remains. This crucial step is that of filing the franchise. All franchise businesses in Malaysia must be registered. During registration, the following information will be required:
- Name and the description of the product which will be produced by the business
- The rights granted to the franchise which must be in accordance with the specifications listed in Malaysia’s business laws
- Fees which are expected to be paid by the franchisee including promotion fees
- Obligations of the franchisor and franchisee
- Effects of termination or expiration of the franchise-related agreement
- The rights of the franchisee to use the trademark or intellectual property of the franchise
- Conditions under which the franchisee may assign the rights of the franchise.
Evidently, it has been shown that the process of starting a franchise in Malaysia involves much preparation. Many requirements must also be fulfilled. Therefore, before just embarking on starting a franchise business, contact us at Paul Hype Page & Co. We are always willing to help you through our professional team to ensure that your franchise business is set up in the most suitable way possible. We will also help you make intelligent business decisions based on the general status of franchise businesses in Malaysia.
Starting a Franchise Business in Malaysia FAQs
Probably the primary challenge facing most who start a Malaysia-based franchise business is that locating and selecting a suitable franchisor. Those who fail to do so might find that conducting the business operations of a franchise business in Malaysia might be more difficult than they would otherwise have expected.
Franchisors are permitted a certain amount of control over the franchise’s business operations. According to the Franchise Act, the franchisor is expected to register a trademark or service mark before continuing with the application for a franchise. The Franchising Act also states a franchise term should not be less than five years. Furthermore, the Act protects franchisee through certain provisions which are not offered to franchisors.
In Malaysia, franchises are governed by the Franchise Act of 1998. According to the Franchise Act, a franchise business involves an agreement between parties which involves a franchisee’s being granted a permit by the franchisor. This permit allows the franchisee to conduct business activities in a manner which may be determined by the franchisor. According to Malaysian franchise laws, registration is to be done with the Registrar of Franchises before the franchise business begins its operations.