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"YOUR FRANCHISE BUSINESS PARTNER"
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FAQ

1.What 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.
2.What 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:
  1. The business is operated in accordance with a system established by the franchisor.
  2. For a fixed term.
  3. The franchisor grants the franchisee the right to use trade mark/trade secret etc owned by the franchisor.
  4. The franchisor has the right to administer continuous control over the operations of the business.
  5. The franchisor has the responsibility to provide professional assistance.
  6. Payment of an agreed sum/other considerations by the franchisee to the franchisor.
  7. The franchisee operates the business separately from the franchisor.
3. What are the advantages of a Franchise Business?
Franchisee:
  1. Lower business risk.
  2. Opportunity to distribute goods or services that are already popular.
  3. Enjoy the economies of specialisation.
  4. Guidance from an efficient business management system.
  5. Continuous support from franchisor, government agencies and financial.
Franchisor:
  1. Opportunity to expand business without any capital outlay.
  2. Enjoy the economies of specialisation.
  3. Risk sharing.
  4. Reduction in human resource management.
  5. Receive extensive feedback on the business.
  6. More focus can be given to research and development (R&D).
4. How 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.
5. Can 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.
6. Do 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.
7. What about the business, 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.
8. What are the requirements necessary to be a Franchisor ?
Please refers the requirement as follows:
  1. Your product to be franchised must be stable and well accepted by the public.
  2. You must have guidelines or detailed and comprehensive operations manual.
  3. You must have a comprehensive training programme on a continuous basis.
  4. Standardized accounting system.
  5. You must have technical advisory services on the use of equipment and machinery and the suitability of the business location.
  6. You must have ability to monitor and control to ensure that the product and services are consistent in quality and homogenous in nature.
  7. Last but not least, You must have a comprehensive business plan.
9. Do I require registering with with the Franchise divison 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.
10. What is the most popular form of Franchise?
There are presently 313 registered franchise systems and more than 7500 franchising outlets in Malaysia in sectors ranging from food and beverage to the automotive related sector. ( Car sales, service centers, tire services), apparels and accessories, childcare and pre-school education, retailing and supermarket, health care, IT and telecommunication, hotels and tourism agencies, printing, photo-shops, etc.
11. I 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.
12. How does a franchise chain start?
Imagine a store owned by an individual with a particular concept. If the business is successful, the owner may develop a second or third store and hire employees for the day-to-day operations. At that point, if the entrepreneur still wants to expand but prefers not to operate additional stores himself or herself, he or she may decide to “franchise” the store name and business system to an independent business person known as a franchisee. In return, the entrepreneur may ask for an initial fee and/or a continuing royalty payment based on a percentage of that franchisee's sales. The business is now franchised.
13. When I visit a store in my area, for example, a well known fast food restaurant, how can I tell whether that restaurant is operated by Franchisor or Franchise?
It's difficult to tell just by visiting the restaurant. However, if it is a franchise, there should be some signage in the restaurant which indicates that the restaurant is independently owned and operated. Many companies have stores that are operated by franchisees but also have stores that are company owned and operated. So it's entirely possible that of two stores with the same name, one may be operated by a franchisee and the other operated by the company. In either case, the products, services, and quality should be the same.
14. What is “Business Format” Franchising?
In business format franchising, the franchisor prescribes for the franchisee a complete plan, or format, for managing and operating the establishment. The plan provides step-by-step procedures for major aspects of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the franchisees. The major advantage of buying a business format franchise is that the “system,” the means for distributing goods and or services, has been developed, tested, and associated with the trademark. As a result, rapid expansion of a successful retail concept can occur more quickly than through company-owned expansion. Sales by business format franchisors continued to increase steadily throughout the 1990s and into the 21st century. In 2001, comparing business format franchising to product distribution franchising, business format franchising had about 4.3 times as many establishments, employed 4 times as many workers, generated 2.5 times the payroll, and produced nearly 3 times as much output.
15. What are the major growth industries in “Business Format” Franchising?
As the economy becomes more service and technology oriented, as more women enter the work force, and as a larger percentage of the population grows older, growth areas in franchising are responding to these changes. The industry categories in franchising that are expected to continue to experience rapid growth for the start of the new century are service-related fields such as home repair and remodeling, carpet cleaning, household furnishings, and various other maintenance and cleaning services; business support services including accounting, mail processing, advertising services, package wrapping and shipping, personnel and temporary help services, and printing and copying services; automotive repairs and services such as quick-lube and tune-up; and other areas such as environmental services, hair salons, health aids and services, computers, clothing, children's services, educational products and services, and telecommunications services. While it is important to consider industry growth before investing in a franchise, it is more important to analyze an individual franchise company's track record, keeping in mind that quick growth does not always spell success. A franchise organization that grows too quickly might not have a service team in place to support all of the units properly. Overall, long range trends indicate a steady, solid growth in business format franchising. Some will fall by the wayside, as is natural with any business, but others may well be the “household name” franchise success stories of tomorrow.
16. Specifically, what kinds of business lend themselves to franchising?
Actually, Franchising cover everything as long as you can sell the product, such as Food Industry, Hotel Chain, Services, Clothing and many more.
17. Are 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.
18. How 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.
19.If I want to buy a Franchise, what should I do to get started?
  1. Identify companies offering franchises.
  2. Get the information the company directly.
  3. Examine what the franchise relationship entails.
  4. Study on company growth and progress.
20. What kind of investment is necessary to buy Franchise?
Investment requirements differ tremendously. It all depends on the industry and the type of business. Total start-up costs can range from RM20,000 or less, to over RM1,000,000, depending on the franchise selected, and whether it is necessary to own or lease real estate to operate the business. Moreover, the initial franchise fee for most franchisors is between RM10,000 and RM30,000. Seventy percent of franchisors charge an inital franchise fee of RM40,000 or less. The average investment, excluding real estate costs, is between RM350,000 -RM400,000. You must discuss the inital fees and opening costs with individual companies.
21. Would I make a successful Franchisee?
A successful franchisee should be suited to the industry of which he or she is a part, suited to the particular franchise company, and suited to the franchise system generally. Important questions to ask yourself include: Am I suited to the industry physically and by experience, education, learning capacity, temperament and financial ability? What type of work is most appealing to me; for example, do I enjoy working with food, mechanical things, people, real estate, books and recordings, sporting goods, etc.? Am I prepared to work hard and take financial risks? Do my advisors, family, and friends think I am adaptable and trainable? How do I react to controls? Am I a loner - resenting authority and restraints, or can I accept guidance and direction happily? If I prefer to act as a passive investor in the franchise, will the company accept this? How do I personally feel about the company's image and products and services? The right answers to these types of questions help determine your potential success as a franchisee.
22. How can I be sure I won’t lose money?
Nothing is certain in this world; no one can be 100 percent sure. Although the majority of franchisees are satisfied, successful business people, some do suffer financial losses. That's why you must be particularly wary of any company which "guarantees" profit or certain success. If you hear a claim about a company that sounds too good to be true, it probably is. Investigation of all earnings claims made by a franchisor is especially important. But, regardless of earnings claims, you must recognize that your success can come only through hard work. Success or failure ultimately depends on you.
23. What are some of the drawback of Owning a Franchise?
  1. You need to sacrifice your own personal time.
  2. You need to work hard.
  3. You need to be dedicated.
  4. You need to be committed.
24. Do I need to be concerned whether a company is a Member of The Malaysia Franchise Association?
Companies that belong to MFA must meet certain membership requirements. They must have a satisfactory financial condition and comply with all applicable franchise laws. In addition, all members must agree to abide by the Code of Ethics. MFA members are kept abreast of every change in franchising laws. MFA provides continuing educational programs for members on how to conduct their businesses. They receive the latest information about topics such as improving relationships with franchisees, use of technology, public relations, marketing, advertising, field operations, networking and things a company with an eye to the future must know and implement to compete in the marketplace.
25. Are there any current trend in Franchising?
Among the most important trends in franchising today are the internationalization of franchising, the emergence of women and minorities in franchising, and the increased use of technology. All of these have profound and positive effects on franchising and make it an even more dynamic method of doing business today.
26. How can I evaluate my potential to become a successful Franchisee?
  1. Skills, Ability, Experience.
  2. Communication Skills.
  3. Eager for succeed.
  4. Creative.
27. How 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.
28. Can 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.
29. Can 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.
30. 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.
31. What is the Disclosure Document?
The Federal Trade Commission (FTC) requires sellers of franchises and other business opportunity ventures to provide prospective investors with the information they need to make an informed investment decision. It also requires that all earnings claims be documented, that the information investors receive be complete and accurate and that investors have adequate time to consider and evaluate the disclosures before making any final purchase commitment. All required information is given to prospective investors in the form of a franchise disclosure document, which must be furnished at least 10 business days before any purchase may occur
32. How do I ensure that the business concept work in my country?
The business has to develop agreements in place in the 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.
33. How can I start a business if it's not already in my country?
Establishing a local master license first.
34. What is a master license?
Master licensing is the most commonly used and most effective method of expanding franchise systems internationally. A master license (also known as a master franchise) 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:
  1. Open and operate the first franchise center in the country.
  2. Expand the network throughout the country or countries by selling franchises to other people within the country.
  3. 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.
35. What is an area 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.