Franchise Agreement

Description

• A Franchise Agreement is a legally binding contract between a franchisor and a franchisee that outlines the terms and conditions for operating a business under the franchisor’s established brand. It governs the rights, responsibilities, and obligations of both parties, ensuring the franchise’s success and protecting the brand’s reputation.

GOV Department

• Kementerian Perdagangan Dalam Negeri dan Kos Sara Hidup (KPDN) / Ministry of Domestic Trade and Cost of Living

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