Description
- A Franchise Agreement is a formal contract that defines the relationship between a franchisor and a franchisee, granting the franchisee the right to operate a business using the franchisor’s brand, system, and support. It sets out clear terms on operational standards, business conduct, and mutual obligations, ensuring consistency, brand protection, and long-term business growth.
GOV Department
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Agreements related to franchise operations may require compliance with the Ministry of Domestic Trade and Cost of Living (Kementerian Perdagangan Dalam Negeri dan Kos Sara Hidup – KPDN) to ensure adherence to current franchise laws and regulatory standards in Malaysia.
License Name (Malay)
- Perjanjian Francais
Details
- The agreement specifies the rights to use the franchisor’s trademark, brand, and business model.
- Includes operational guidelines, training, marketing support, and royalty payments.
- Covers the initial franchise fee, ongoing royalties, and other financial arrangements.
- Defines the geographical territory and duration of the franchise relationship.
- Includes dispute resolution mechanisms and conditions for renewal or termination.
Important Rules
- The franchisor must register the franchise with KPDN under the Franchise Act 1998 before entering into an agreement.
- The agreement must clearly define the obligations of both franchisor and franchisee.
- The franchisee must comply with the franchisor’s operational and branding standards.
- Confidentiality and non-compete clauses must protect the franchisor’s proprietary information.
- Any amendments to the agreement must be mutually agreed upon and documented.
Compound & Punishment
- Failure to register the franchise with KPDN may result in:
- Fines up to RM500,000 for the franchisor and/or imprisonment for responsible parties.
- Breach of the agreement, such as unauthorized use of the brand or non-payment of royalties, may lead to:
- Termination of the franchise agreement.
- Legal action for damages or loss of brand reputation.
- Misrepresentation of franchise terms can lead to penalties under the Franchise Act 1998.
Advisor
Penny Lim , Legal Consulting
Ms. Penny is responsible for identifying possible legal issues and implementing solutions in the areas of government regulation, customer protection, and fair employment. Legal Counsel. Ms. Penny can advise on legal issues such as government and business permits, review legal documents before signing them, and complete legal research as needed by the company
Commonly Asked Questions
A franchise agreement in Malaysia is a legal contract between franchisor and franchisee. Conzlab helps businesses draft and review franchise agreements.
The cost depends on business type and contract terms. Conzlab offers affordable services for preparing franchise agreements.
You need franchise disclosure, business registration, and agreement details. Conzlab guides clients with the full checklist.