Buying a Franchise in Malaysia: Check Its Registration

A well-known brand name does not prove that its franchise offer complies with Malaysian law. Before paying a deposit or signing an agreement, verify who is selling the rights and their registration status. These checks help prospective franchisees distinguish official evidence from marketing claims and identify their own obligations before opening a business.

1. Understand which registration is actually required

Malaysia has specific legislation: the Franchise Act 1998 [Act 590], including amendments made through the Franchise (Amendment) Act 2020, which came into force on 28 April 2022. The Act applies to the sale of franchises in Malaysia where the franchised business operates in Malaysia.

Under section 6, franchisors must register their franchise with the Registrar of Franchises before operating a franchise business or offering a franchise for sale. A claim that registration will be completed after you pay is therefore no substitute for evidence of compliance.

Distinguish between these three types of registration:

• Business or company registration: establishes the entity’s existence through the Companies Commission of Malaysia, but does not authorise it to offer franchises.
• Trade mark registration: concerns protection of the brand’s identity, not confirmation of franchise registration.
• Franchise registration: relates to the specific requirements under the Franchise Act 1998.

Association membership, business awards and participation in exhibitions are not substitutes for franchise registration either. For offers involving a foreign franchisor, ask a lawyer to check the approval and registration requirements applicable to the proposed structure, rather than simply accepting a certificate from the franchisor’s home country.

2. Match the certificate to the party receiving your money

Ask for a copy of the evidence of franchise registration and details of the entity that will sign the agreement. Do not stop at asking, “Is this brand registered?” A more precise question is, “Does this party have the registration and authority needed to sell this franchise to me?”

Prepare a simple checking table with four columns: information on the certificate, information in the agreement, information on the invoice, and outstanding questions. Cross-check:

• The entity’s full name and company registration number.
• The name of the brand or franchise business being offered.
• The franchise registration reference number.
• The approval and expiry dates, where stated.
• The name of the bank account holder receiving payment.

If the seller is a master franchisee, ask for evidence of its authority to offer sub-franchises. That authority must cover Malaysia and the offer you are considering. A marketing appointment letter alone does not necessarily confer authority to sign agreements or receive money on the franchisor’s behalf.

For example, the certificate may name one company while the deposit invoice is issued by another company in the same group. This difference does not necessarily indicate fraud, but the relationship between the companies and the authority to receive payment must be explained in writing before the transaction takes place.

3. Check the current status, not just an old certificate

The Franchise (Prescription of Period of Effectiveness of Registration) Regulations 2022 prescribe a five-year registration period. This is separate from the term of your franchise agreement. An ongoing contract does not, in itself, prove that the seller’s registration status is up to date.

Official registration guidance also states that existing registrations must be re-registered through MyFEX 2.0. An old certificate or a printout from a previous system should therefore be followed up with confirmation of the current status.

Use the Registrar of Franchises’ official channels or the official registration system currently in use. If a public search does not provide enough information, submit an enquiry with the entity’s name, company registration number, brand name and registration reference number. Keep the response and the date of the check in your purchase file.

If the seller says a renewal is being processed, ask for evidence of the application and seek clarification from the Registrar about its status. An application receipt is not proof of approval. Equally, a cropped screenshot or a salesperson’s message is no substitute for official confirmation.

Registration is also not a guarantee of profitability, management quality or the suitability of a location. It is an important compliance check, not a substitute for a full commercial assessment.

4. Include your own registration in the purchase timetable

Prospective franchisees also have registration obligations. Under section 6B, a franchisee of a local franchisor must register the franchise within 14 days of signing the agreement. Under section 6A, a franchisee of a foreign franchisor must register before starting the franchise business.

Do not rely on outdated guidance stating that local franchisees do not need to register. Before signing, establish which category applies to you based on the parties to the agreement, particularly where a foreign brand is offered through a local master franchisee.

Set out in writing who will prepare the documents, submit the application, pay the fees and retain evidence of registration. Administrative assistance from the franchisor does not mean you can disregard your own obligations. Include the deadlines in your opening timetable, rather than simply adding them to a list of tasks to handle once the premises are ready.

If there are discrepancies or the status remains unclear, postpone payment and seek advice from an independent lawyer. Do not assume that all unregistered agreements have the same legal consequences; the legal position of the transaction and the available remedies require a case-specific assessment.

Practical action: before paying, compile a file containing evidence of current registration, cross-checked seller details, confirmation of authority to receive money, and your own registration timetable.