This article was first published in 2010.

Opportunities abound for international franchise expansion in Malaysia.

The Malaysian government is one of the most franchise-friendly in the world, with one of its agencies set-up to invest in international franchises expanding into Malaysia.

The government agency responsible for franchise development in Malaysia, Perbadanan Nasional Berhad (PNS) aims to assist Malaysians in acquiring Master Franchise rights, including assistance with negotiations, franchise financing schemes, loans and equity participation.

Kerry Miles was in Malaysia in 2010 for the Malaysia Franchise Association International Conference, organised by the Ministry of Domestic Trade, Co-operative and Consumerism, PNS and the Malaysia Franchise Association, held in Kuala Lumpur.

Kerry says there is currently a push by the Malaysian government to attract more international franchises, particularly mobile and service franchises into Malaysia, providing some unique and interesting opportunities.

“Through the Foreign Franchise Investment Scheme government agency PNS not only participates in Master Franchise rights negotiations but may also take a minority stake as a joint venture partner – which is really quite unique,” Kerry said.

“PNS partners as a long term shareholder, acting as one of the Directors and expects at least 5 per cent equity, up to 30 per cent.

“Currently PNS are targeting service-based franchises in particular, which don’t require expensive retail space, with a start-up cost of 200,000 Malaysian ringgit (A$71,000) or less.”

Challenges and Opportunities in Malaysia Franchising

Malaysia is potentially a good franchise hub.

Currently there are 144 international franchises operating in Malaysia and foreign franchisors have an advantage as Malaysians like international brands.

In addition, Malaysia can be a base into the Middle East and other Muslim countries, with a number of international franchise brands already using Malaysia as their regional hub for training, research and development, production and distribution.

However, franchising in Malaysia is not without its challenges.

Retail franchises can be challenging for a number of reasons, including higher retail space rentals, landlords can be choosy in the brands they accept, there are many similar products and a comparatively smaller urban population.

There is also a shortage of management skills in the franchise sector which leads to staff poaching among local and international brands.

However there is still a lot of opportunity in Malaysia.

Based on record, in 2008 there were 318 franchise businesses in Malaysia with a population of 26 million people, compared to 380 franchise brands in Singapore with a population of only 3.7 million people.

Since 2008 the Malaysian franchise sector has continued to grow, now with 447 franchises and 4000 franchisees.

Malaysian Franchise Regulations

Franchising in Malaysia is regulated by the Franchise Act 1998, under supervision of Ministry of Domestic Trade, Cooperative and Consumerism.

The birth of the Franchise Act 1998 brought substantial changes to the sector.  The provisions of the Act has the underlying objective of protecting the interest of franchise players.

Under the Franchise Act, franchises in Malaysia need to register with the Registrar of Franchise.

International franchises looking to operate in Malaysia must first apply in writing to the Registrar of Franchise, including:

  • the name of company,
  • type of business,
  • the company that is buying the franchise,
  • the number of existing outlets, and
  • the proposed franchise site if it has been identified.

The approval process takes between three to six months. Austrade and PNS can assist with the process, as well as numerous franchise consultants and franchise lawyers.

Importantly Intellectual Property is also protected in Malaysia.