What is a Franchise?
A franchise refers to a business marketing system whereby a company (franchisor) grants the right to another company (franchisee) the rights to operate a business in accordance to the franchise system established by the franchisor during a term to be determined by the franchisor at a determined location, to distribute an existing product or service. In other words, a franchise is a business partnership between a business owner and an investor wherein the business owner will provide the product and business system and in return, the investor will provide capital in the form of funding, human resource and continuous commitment to the business.
What is the definition of a franchise under The Franchise Act 1998?
Under the Franchise Act 1998, a franchise means a business contract or an agreement with the following attributes:
- The business is operated in accordance with a system established by the franchisor.
- For a fixed term.
- The franchisor grants the franchisee the right to use trade mark/trade secret etc owned by the franchisor.
- The franchisor has the right to administer continuous control over the operations of the business.
- The franchisor has the responsibility to provide professional assistance.
- Payment of an agreed sum/other considerations by the franchisee to the franchisor.
- The franchisee operates the business separately from the franchisor.
What are the advantages of a Franchise Business?
- Lower business risk.
- Opportunity to distribute goods or services that are already popular.
- Enjoy the economies of scale.
- Guidance from an efficient business management system.
- Continuous support from franchisor, government agencies and financial.
- Opportunity to expand business without any capital outlay.
- Enjoy the economies of scale.
- Risk sharing.
- Reduction in human resource management.
- Receive extensive feedback on the business.
- More focus can be given to research and development (R&D).
How do I become a Franchisee?
To be a franchisee, you have to:
1. Identify a franchise product that is suitable to your interest and affordability
2. Obtain the latest information on the selected product from the franchisor
3. Carry out a survey to determine:
- A suitable location.
- Feasibility of business.
- Capital outlay.
- The franchise package.
- The level of support extended by the franchisor, through existing franchisees.
- Apply to franchisor to be a franchisee.
- Wait for franchisor’s response.
If the franchisor accepts your application, you can commence the franchise business according to the guidelines provided by the franchisor.
Can I be a Franchisee of a brand not within Pernas list of panel franchisors?
Yes, you can, but it is easier if you select from our list of panel. It will help you to speed up your applications process.
Should you require more information, please contact our Franchise Service Centre at 1-800-22-1767, or through the Feedback Management System
Do I have to submit a Business Plan to start a franchise?
Any submission of a Business Plan will depend on the franchisor’s requirement. Nevertheless, a Business Plan is a requisite for applying for a business financing loan from any financial institution.
What about the business premise, do I have to find one on my own or will it be provided?
Yes, you have to look for your own premise. The franchisor will assist on choosing a suitable location and premise before the commencement of the franchise business. The Ministry will extend its assistance by identifying a suitable premise from among those available in the agencies that are under its jurisdiction; for example, MARA, PKEN and PKKM.
What are the requirements necessary to be a Franchisor ?
Please refers the requirement as follows:
- Your product to be franchised must be stable and well accepted by the public.
- You must have guidelines or detailed and comprehensive operations manual.
- You must have a comprehensive training programme on a continuous basis.
- Standardized accounting system.
- You must have technical advisory services on the use of equipment and machinery and the suitability of the business location.
- You must have ability to monitor and control to ensure that the product and services are consistent in quality and homogenous in nature.
- Last but not least, You must have a comprehensive business plan
Do I require registering with the Franchise division prior to start a Franchise business?
Under the Franchise Act 1998, only those who have a product to be franchised (franchisor) are required to register.
I have doubts about a Franchise business, to whom should I refer?
You can refer to the Franchise Registration & Enforcement Unit for further action by filling in a Complaint Form at the Franchise Development Division Ministry of Domestic Trade, Cooperative and Consumerism (MDTCC).
Should you require more information,