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Franchise Act

In: Business and Management

Submitted By fredc
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Franchising Law in Malaysia
A comprehensive analysis of the Franchise Act Introduction
1. The business of franchising has transformed the face of most business practices in Malaysia and has become a revolutionary way for Malaysian companies to develop, increase their production capability and expand their distribution chain both vertically and horizontally. Franchising fosters business opportunities for Malaysian franchisees, particularly small start-up companies (the “Franchisee”) under the guidance and assistance of another company (the “Franchisor”), which has the requisite experience and knowledge of the market practice and industry. The Franchisee may leverage on the Franchisor’s international and/or regional reputation and goodwill through its use of the Franchisor’s trade marks and intellectual property rights as well as the Franchisor’s tested technologies, trade secrets and business systems. Before the enactment of the Franchise Act 1998 (the “Franchise Act”) on 8 October 1998, franchising in Malaysia was governed by contractual principles and the absence of complex statutory provisions or guidelines allowed parties to freely negotiate the terms of their franchising arrangement. In contrast, the Franchise Act highly regulates the franchising industry as it not only controls the terms of any franchise agreement but also implements a systematic scheme of registration for the Franchisor, Franchisee and franchise brokers. Although this has created a regimented legal structure for the franchising industry in Malaysia, the Franchise Act brings with it certainty and greater protection for Malaysian businesses, particularly the small medium businesses.

Elements of a Franchise
2. Principally, the Franchise Act applies to the sale of any franchise in Malaysia whereby the franchised business operates in Malaysia. A “franchise” falls within the...

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