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WHAT ARE THE ADVANTAGES OF FRANCHISING ?

Franchising enables a franchisor to acquire start-up funds easier. Franchisor supply the know-how, experience and initial capital investment. However, supplemental capital investment will be mostly provided by franchisees to expand the network. With the investment from franchisees, business outlets can be established in a relatively short time and the trademark or brand name can be enhanced.

Franchisees will have marketing advantages of the franchisor. The rapid expansion of a franchise network will naturally builds consumer's recognition and understanding of the service or product and creates recognition and value of the trademark.

Essential services and support will be provided by the franchisor to the franchisee to be competitive in the market in addition to operating a profitable business.

Franchising also offers franchisee an exclusivity within a particular area and franchisee has a direct and continuing financial interest in his business unlike employed managers.

WHAT ARE THE DISADVANTAGES OF FRANCHISING ?

Franchising is limited to only one product or services which is controlled by the franchisor.

Franchisees may find that they are loosing the individual management freedom as they operate the business under the franchisor's business format, management system and a shared trade identity.

Since the franchisor's revenue is based on gross sales of franchisees, franchisees have to pay an up-front fee and an on-going royalty to the franchisor for the grant of the franchise which usually covers the cost of franchisor's cost of training, research and development and pre-opening assistance.

I AM A FOREIGNER WHO WANTS TO SELL A FRANCHISE IN MALAYSIA. WHAT SHOULD I DO ?

Pursuant to section 54 of the Franchise Act 1998, you must first apply to the Registrar of Franchise by way of letter.

You must state in your letter, the name of company, type of franchise business, number of existing outlets and if identified, the company to buy franchise.

I AM A LOCAL FRANCHISOR WHO WANTS TO SELL A FRANCHISE TO A FOREIGNER. WHAT SHOULD I DO ?

Pursuant to section 54 of the Franchise Act 1998, a franchisor desiring to sell a franchise to a person who is not a Malaysian citizen must obtain approval from the Registrar of Franchise.

You may be subject to conditions imposed by the Registrar.

You shall apply by way of letter to the Registrar stating the name of your company, type of franchise business, number of existing outlets and company to buy franchise, if identified.