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Franchise Regulation in Malaysia

Franchise Regulation in Malaysia. FRANCHISE DEVELOPMENT DEPARTMENT MINISTRY OF ENTREPRENEUR AND COOPERATIVES DEVELOPMENT (MECD). Franchise Act 1998 (FA’98). Enforced since 1999 Regulates and governs franchise arrangements in Malaysia Applies to the sale of franchises throughout Malaysia

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Franchise Regulation in Malaysia

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  1. Franchise Regulation in Malaysia FRANCHISE DEVELOPMENT DEPARTMENT MINISTRY OF ENTREPRENEUR AND COOPERATIVES DEVELOPMENT (MECD)

  2. Franchise Act 1998 (FA’98) • Enforced since 1999 • Regulates and governs franchise arrangements in Malaysia • Applies to the sale of franchises throughout Malaysia • Enforced by MECD

  3. Approval and Registration of Franchise Business

  4. Approval under Sec.54Franchise Act 1998 • Apply to foreign franchisor • Prerequisite before offering their franchise for sale in Malaysia or to Malaysians • Procedure under Sect.54 FA’98 • To ensure the foreign franchises are not contrary to public interests.

  5. Approval (Section 54) Applicant: ……………………………………………… 1)Letter Of Intent - date of incorporation and commencement of business - franchise concept and background of company - franchise experience (self-owned and franchise outlets) - proposed master franchise / franchise in Malaysia (if already identified) *2.Certified True Copy of Incorporation *3. Certified True Copy of Proof of Trademark Registration 4. Processing Fees (RM 50.00) 5. Brochures and pictures of outlets Checked by, ……………………... Date: …………………… To be certified by Advocates & Solicitor/Magistrate/ Judge / Commissioner For Oaths / Notary Public

  6. WORKFLOW OF APPLICATION FOR APPROVAL BY FOREIGN FRANCHISORS UNDER SECTION 54 (1) FRANCHISE ACT 1998 Receives the application Check the documents Not complete Complete Request to the applicant to complete the documents Prepare the Application Paper Submit the Paper to the Registrar for the decision Approve / Reject Issuance of Approval / Rejection Notice Period of working process : 1 months upon completion of documents and information requested

  7. REGISTRATION • 3 categories : (i) Franchisor (Section 6 Franchise Act 1998) A person who grants a franchise to a franchisee and includes a master franchisee and his relationship with a sub-franchisee. (ii) Master Franchisee of Foreign Franchisor (Section 6 Franchise Act 1998) 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 (iii) Franchisee of Foreign Franchisor (Section 55 Franchise Act 1998) A person who has been granted the rights by a foreign franchisor but does not sub franchise to another person.

  8. Checklist for Registration of Franchisor / Master Franchisee of Foreign Franchisor( Section 6 Franchise Act 1998 ) 1. Disclosure Document (BAF 1) 2. Form BAF 2 3. Sample Franchise Agreement (B.M and B.I) 4. Operation Manual (B.M / B.I) 5. Training Manual (B.M / B.I) 6. Latest Audited Accounts (3 years) (with detailed income statement ) 7. 5 years Franchisee Financial Projection 8. Prototype/s Outlet photographs 9. Certified True Copy Certificate Of Incorporation of Company (Form 9, 24, 44, 49) or Certificate of Business Registration

  9. Cont’… (Borang D, Kaedah 13) together with Memorandum of Association (MOA) and Articles of Association (AOA) 11.Certified True Copy of Registered of Trade Mark or Intellectual Property mark documents (if trademark/intellectual property mark has been assigned to applicant, a certified true copy of the relevant legal instrument/document must be submitted) 12. Company Annual Report 13. Brochures of the Company 14. Company Profiles (ROC) and Business Profiles (ROB) from Companies Commission of Malaysia (SSM) 15. Processing Fee (RM50.00)

  10. Additional Information for Financial Analysis • Number of company’s outlet/branch together with address, opening date, closing date (if any) • Initial Investment Cost according to the prototype outlet (states the location, opening date of the outlet) • Audited Account or Management Account of the prototype outlet (must be certified true copy) • Details on initial investment cost (example : list the elements of the cost i.e.: working capital, rental deposit etc.) • Justification on the fees being imposed on the franchisee

  11. Requirements of Franchise Agreement (Section 18 of FA’98) • The Franchise Agreement shall contain but is not limited to : • the name and description of the products and business under the franchise; • the territorial rights • the fees • the obligations of the franchisor • the obligations of the franchisee • the franchisee’s rights to use the mark or any other intellectual property • Assignment of rights by the franchisee • Cooling Off Period (not less than 7 days)

  12. Cont’… • a description pertaining to the mark or any other intellectual property owned or related to the franchisor which is used in the franchise • type and particulars of assistance provided by the franchisor • duration of franchise (not less than 5 years) • term of renewal • the effect of termination / expiration of the agreement • Operation / Training Manual • Alternative Dispute Resolution

  13. Checklist for Registration of Franchisee of Foreign Franchisor (Section 55 Franchise Act 1998) 1) Form BAF 2 2) Certified True Copy of duly executed and stamped franchise agreement between foreign franchisor and franchisee 3) Certified True Copy of Certificate of Incorporation (Form 9 or 13, 24, 44 and 49) 4) Certified True Copy of Registered trade mark or intellectual property mark documents with Malaysian Intellectual Property Office (MIPO) 5. Brochures/Company Annual Report 6. Processing Fee RM 50.00

  14. Contact Information • Website MECD: http://www.mecd.gov.my • E-mel: abdullah@mecd.gov.my • Address: Franchise Development Department Level 4, Tower Block No.18, Persiaran Perdana Presint 2 62652 Putrajaya • Telephone: 03-8880 5611 (Abdullah) 03-8880 5589 (Norzaimimi) 03-8880 5590 (Ridhwan) 03-8880 5000 (General Line) • Fax : 03-8880 5617

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