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FAQ

NO.FAQ
1What is a Franchise?

A franchise refers to a business marketing system whereby a company (franchisor) grants the right to another company (franchisee) the rights to operate a business in accordance to the franchise system established by the franchisor during a term to be determined by the franchisor at a determined location, to distribute an existing product or service. In other words, a franchise is a business partnership between a business owner and an investor wherein the business owner will provide the product and business system and in return, the investor will provide capital in the form of funding, human resource and continuous commitment to the business.

2What is the definition of a franchise under The Franchise Act 1998?

Under the Franchise Act 1998, a franchise means a business contract or an agreement with the following attributes:

  • The business is operated in accordance with a system established by the franchisor.
  • For a fixed term.
  • The franchisor grants the franchisee the right to use trade mark/trade secret etc owned by the franchisor.
  • The franchisor has the right to administer continuous control over the operations of the business.
  • The franchisor has the responsibility to provide professional assistance.
  • Payment of an agreed sum/other considerations by the franchisee to the franchisor.
  • The franchisee operates the business separately from the franchisor.

3What are the advantages of a Franchise Business?

Franchisee:

  • Lower business risk.
  • Opportunity to distribute goods or services that are already popular.
  • Enjoy the economies of scale.
  • Guidance from an efficient business management system.
  • Continuous support from franchisor, government agencies and financial.

Franchisor:

  • Opportunity to expand business without any capital outlay.
  • Enjoy the economies of scale.
  • Risk sharing.
  • Reduction in human resource management.
  • Receive extensive feedback on the business.
  • More focus can be given to research and development (R&D).

4How do I become a Franchisee?

To be a franchisee, you have to:
1. Identify a franchise product that is suitable to your interest and affordability
2. Obtain the latest information on the selected product from the franchisor
3. Carry out a survey to determine:

  • A suitable location.
  • Feasibility of business.
  • Capital outlay.
  • The franchise package.
  • The level of support extended by the franchisor, through existing franchisees.
  • Apply to franchisor to be a franchisee.
  • Wait for franchisor's response.

If the franchisor accepts your application, you can commence the franchise business according to the guidelines provided by the franchisor.

5Can I be a Franchisee of a brand not within PNS list of panel franchisors?

Yes, you can, but it is easier if you select from our list of panel. It will help you to speed up your applications process.

Should you require more information, please contact our Franchise Service Centre at 1-800-22-1767, or through the Feedback Management System

6Do I have to submit a Business Plan to start a franchise?

Any submission of a Business Plan will depend on the franchisor's requirement. Nevertheless, a Business Plan is a requisite for applying for a business financing loan from any financial institution.

7What about the business premise, do I have to find one on my own or will it be provided?

Yes, you have to look for your own premise. The franchisor will assist on choosing a suitable location and premise before the commencement of the franchise business. The Ministry will extend its assistance by identifying a suitable premise from among those available in the agencies that are under its jurisdiction; for example, MARA, PKEN and PKKM.

8What are the requirements necessary to be a Franchisor ?

Please refers the requirement as follows:

  • Your product to be franchised must be stable and well accepted by the public.
  • You must have guidelines or detailed and comprehensive operations manual.
  • You must have a comprehensive training programme on a continuous basis.
  • Standardized accounting system.
  • You must have technical advisory services on the use of equipment and machinery and the suitability of the business location.
  • You must have ability to monitor and control to ensure that the product and services are consistent in quality and homogenous in nature.
  • Last but not least, You must have a comprehensive business plan

9Do I require registering with the Franchise division prior to start a Franchise business?

Under the Franchise Act 1998, only those who have a product to be franchised (franchisor) are required to register.

10I have doubts about a Franchise business, to whom should I refer?

You can refer to the Franchise Registration & Enforcement Unit for further action by filling in a Complaint Form at the Franchise Development Division Ministry of Domestic Trade, Cooperative and Consumerism (MDTCC).

Should you require more information, please contact our Franchise Service Centre at 1-800-22-1767, or through the Feedback Management System

11Specifically, what kinds of business lend themselves to franchising?

Franchising cover almost every business sector such as Food Industry, Hotel Chain, Services, Clothing and many more.

12Are the "LOOK-ALIKE" Characteristics a disadvantages? Don't customers or we want variety?

No, it is not the disadvantages in this case. Today, no matter where we go, we expect and want the same quality. The ability to easily recognize a franchised store, restaurant or hotel from the outside guarantees there will be no surprises or disappointments on the inside. Quite simply, we know what to expect and likes it that way.

13How can I be sure that the information provided in the disclosure Document is truthful and accurate?

Even though inaccuracy and misrepresentation carry civil and sometimes severe criminal penalties, there is no way to be absolutely sure. The disclosure document makes fraud and deception less likely. However, because the franchisor has -- under penalty of law -- answered in written (or electronic) form a variety of very important questions you can use to judge the offer, it is recommended that you carefully consider the information provided and evaluate the materials, including the history and reputation of the company and its officers, with the assistance of your lawyer and accountant. Also, be absolutely sure you talk to a substantial number of others who have already obtained franchises from the company you're considering, and ask them to verify any information you question. Learn if they are "satisfied customers" of the franchisor.

14If I want to buy a Franchise, what should I do to get started?

  • Identify companies offering franchises.
  • Get the information the company directly.
  • Examine what the franchise relationship entails.
  • Study on company growth and progress.

Should you require more information, please contact our Franchise Service Centre at 1-800-22-1767, or through the Feedback Management System

15 How can I evaluate my potential to become a successful Franchisee?

  • Skills, Ability, Experience.
  • Communication Skills.
  • Eager for succeed.
  • Creative.

16How much does a Franchise cost?

The cost to buy a franchise varies greatly depending on what industry you choose to start the business in, whether the concept requires a storefront, office, home office, or is mobile, what state you buy the business in, and how much overhead your business will require. There are concepts that cost under $10,000 to start and other franchise businesses that require the investor to have millions of dollars in available liquid capital. Additionally, many franchise concepts offer financing or can help you gain financing if you're interested.

17Can I have a business partner?

This varies depending on the preferences of the franchisor but yes, most concepts will allow you to have a financial partner who may also be an operating partner, if you choose.

18Can I own more than one Franchise?

Yes, but again, this can vary by franchise concept. Many franchisors will sell area or master franchises within a certain specified territory. These larger territories can be costly. If you own a single franchise and are successful, most franchisors will be pleased to sell you another territory. If you own one concept and would like to purchase another franchise from a different, unrelated brand, this is usually possible unless you plan to buy a competing concept. Make sure to read the entire franchise agreement and also have an attorney who specializes in franchise law look over the agreement before you sign it. Let your attorney know that you plan to purchase another franchise concept in the future, so he can ensure you won't have problems.

19 How can I receive a FDD from a Franchise Company?

Inquire to franchise concepts listed on Franchise.com. You will then be contacted by the company. If you are seriously interested in potentially purchasing the concept, they will most likely offer you a copy of their FDD (Franchise Disclosure Document) for review before you make a final decision.

Should you require more information, please contact our Franchise Service Centre at 1-800-22-1767, or through the Feedback Management System

20What is the Disclosure Document?

According to second Schedule, Form 1 under Action 7 of the Franchise Act 1998, a disclosure document should state information about the franshisor's company profile, franchise pakages offered, obligation of franchisor and franchisee, territorial rights, intellectual property and other information pertaining to the franchise business as being guided by the franchisor. It also requires that all earnings claims be documented, that the information franchisee receive be complete and accurate and that franchisee have adequate time to consider and evaluate the disclosures before making any final purchase commitment. All required information is given to prospective franchisee in the form of a franchise disclosure document, which must be furnished at least 10 business days before any purchase may occur.

21How do I ensure that the business concept work in my country?

The business concept has to demonstrate flexibility and adaptability to work effectively in a wide variety of cultural and economic environments: developing countries, advanced economies and even in countries in transition or crisis. The business has to be internationally adaptable to provide a range of basic services that are of need to all businesses, as well as convenience-oriented consumers. According to the Franchise Act 1998, you must to operate your business at least for 3 years, before you can register as a franchise business.

22What is a master franchisee license?

Master franchisee license is the most commonly used and most effective method of expanding franchise systems internationally. A master franchise license (also known as a master franchisee) is the exclusive right to develop the business throughout a country or group of countries. Any franchise business begins to develop in all countries by granting the master license rights for those countries to qualified individuals, groups or companies that reside in those countries. The selected individual, group or country is called a master licensee and has the following responsibilities:

  • Open and operate the first franchise center in the country.
  • Expand the network throughout the country or countries by selling franchises to other people within the country.
  • Provide training, guidance and support to all franchisees in the country or countries. Master licensees generate revenue by selling franchises, collecting royalties from the operation of franchise centers in their territory and from the operation of centers owned and operated by the master licensee.

23 What is an territorial rights franchise?

An area franchise is the right to sell and support franchisees in association with a master licensee. An area franchisee will generally work within a territory such as a province, or county - or a whole country, in some cases. Area franchise opportunities are generally limited to countries and territories offering a large development potential. Area franchisees will also own and operate at least one center franchise.

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