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WHAT IS A FRANCHISE ?

A franchise refers to an agreement between two or more persons whereby a franchisor grants the right to a franchisee to operate a business in accordance to the franchise system established by the franchisor during a term to be determined by the franchisor.

Franchise is a fast growing types of business organizations. It involves the franchisor giving the franchisee the rights to use a mark, or trade secret or any confidential information or intellectual property of the franchisor. This includes a situation whereby the franchisor being a registered user of another person's intellectual property, grants such right to allow the franchisee to use the intellectual property.

A franchise is not a service contract, an agency nor a partnership between a franchisor and a franchisee. A franchisee operates the business separately from the franchisor.

WHO IS KNOWN AS A FRANCHISOR ?

A franchisor is a person who grants a franchise to a franchisee and that includes a master franchise with regards to the relationship with a sub-franchisee or unless otherwise stated in the Franchises Act 1998.

A franchisor will provide advice to the franchisee on setting up and running the business and assists in the supply of material and services, marketing, training and business and technical assistance.

The right to administer continuous control during the franchise term over the franchisee business operation is with the franchisor and that shall be in accordance with the franchise system.

WHO IS THE FRANCHISEE ?

A franchisee is a person who is being granted a franchise. A franchisee includes a master franchisee with regard to relationship with a franchisor and a sub-franchisee with regard to relationship with a master franchisee.

Some franchisors grant the rights to a person to sub franchise to another person at his own expense. The person being granted such rights is known as the master franchisee.

WHAT IS THE PURPOSE OF A FRANCHISE BROKER AND THE REQUIREMENTS TO BECOME ONE ?

A franchise broker is an agent or representative of a franchisor to sell a franchise to any person for a certain consideration. A franchise broker can be a company or an individual but does not include any director, employee or officer of the franchisor or franchisee.

To become a franchise broker, there are certain qualifications that a person have to meet.

An individual intending to be registered as a franchise broker must be a Malaysian citizen and has experience in franchise management or in a related field.

For an individual with a bachelor degree or its equivalent, a minimum 3 years of experience is required. If an individual possesses a Diploma or its equivalent, he or she shall have a minimum 5 years of experience and for those without a bachelor degree or Diploma qualification, at least 10 years experience in franchise management or field related to franchise management is needed.

To register as an individual franchise broker, Form BAF 5 must be submitted with certified true copies of identity card, academic qualifications certificates and an employer's referral letter.

A company intending to register as a franchise broker must be registered under the Company Act 1965 and the key executives must have minimum qualification as required for individual registration. Form BAF 5 have to be submitted accompanied by certified true copies of company or service profile, Form 24, Form 49 and background of board of directors and key executives confirming the qualification and experience in franchising.

The registration of a franchise broker is only valid for one year from the date of registration. Renewal must be made at the Registrar of Franchise 30 days before the last effective date of registration together with prescribed renewal fees.