Establish a Franchise Business in Malaysia
Updated on Tuesday 31st July 2018
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A franchise business in Malaysia is established between a franchisor and a franchisee. At the moment, the top players in this sector are represented by international companies from the United States of America, Singapore and the United Kigdom and more recently, from South Korea. In order to open a company in Malaysia through a franchise business, the investors have several legal options, which are detailed below. Our team of agents in company formation in Malaysia can assist foreign businessmen with information on the legal framework regulating the franchising industry.
Types of franchising agreements in Malaysia
According to the applicable legislation on franchising, international companies wishing to enter a franchise agreement in Malaysia can establish four types of franchises, as follows:
• direct franchising (the foreign company concludes contracts with more individual franchisees in Malaysia);
• multi-unit franchise (the foreign company establishes a contractual relation with a local partner, which has the right to run multiple franchises in the name of the foreign entity);
• national development agreements;
• regional development agreements.
The procedure of company formation in Malaysia for a franchise business is regulated under the Franchise Act 1998. It provides an in-depth regulatory framework on the contracts the parties have to sign and the legal rights and obligations deriving from such agreements. Our team of specialists in company registration in Malaysia can provide legal advice on the Franchise Act, as well as on its amendment, signed in 2012.
The franchise agreement in Malaysia
Through a franchise agreement, the franchisor provides a set of rights to the franchisee related to the manner in which the business will carry its operations on the Malaysian territory. The franchisor determines the aspects that have to be respected by the franchisee, as well as the period in which such rights are granted (which has to be of minimum five years, as per Section 25 of the Franchise Act).
Under the franchise agreement, the franchisor grants the right to the company’s intellectual property and the parent-company will still be entitled to run administrative control over the business operations carried out by the franchisee in Malaysia.
The terms and conditions in which the franchise business will be developed are to be stated in the franchise agreement, as well as in the disclosure document and investors are invited to contact our team of consultants for more details on the provisions of the above mentioned documents.