Understanding Malaysia's Franchise Act: A Guide for Franchisors and Franchisees

 

The Franchise Act was introduced in Malaysia in 1998, with the aim of regulating the franchise industry and protecting the interests of franchisees. The Act defines a franchise as a commercial arrangement where a franchisee is granted the right to operate a business using the franchisor's trademarks, products, and business system.

Under the Franchise Act in Malaysia, all franchisors must be registered with the Registrar of Franchise. The registration process requires the franchisor to submit a disclosure document that contains information about the franchisor, the franchise system, the financial information, and the obligations of both parties.

The Act also requires franchisors to provide franchisees with a written agreement that specifies the terms and conditions of the franchise relationship. The agreement must include details about the franchise fee, royalties, advertising fees, and the obligations of both parties.

To ensure that franchisees are protected, the Act prohibits franchisors from engaging in certain activities, such as making false or misleading statements, imposing unreasonable restrictions on the franchisee, or terminating the franchise agreement without sufficient cause.

In addition, the Act provides for a Franchise Mediation Bureau, which is responsible for resolving disputes between franchisors and franchisees. The Bureau offers mediation services to help parties resolve their disputes in a fair and amicable manner.

Overall, the Franchise Act plays an important role in regulating the franchise industry in Malaysia and ensuring that both franchisors and franchisees are protected. By providing a clear framework for franchising, the Act helps to promote the growth and development of the franchise industry, which is an important contributor to the Malaysian economy.

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