Buying a Franchise in Malaysia: Check the Location’s Suitability First

A well-known brand does not make every location suitable for a franchise business. Premises may look busy but be difficult to reach, fail to meet operational requirements or need costly additional work. Before buying a franchise in Malaysia, make your location assessment an evidence-based decision rather than relying on verbal agreement alone. This process helps prospective franchisees and franchisors align their expectations before any money is spent.

1. Obtain the location criteria before looking for premises

Start by asking the franchisor to provide its location criteria in writing. Do not rely on general instructions such as “a busy area” or “near offices”. Useful criteria should describe the customer profile, floor space, layout, visibility and access needed to support the business concept.

PERNAS, Malaysia’s franchise development agency, explains that prospective franchisees need to assess suitable locations, business prospects and capital outflows. Its guidance also states that franchisees need to find their own premises, with the franchisor helping to select the location and premises. Do not, therefore, assume that the franchise package fee automatically covers finding and approving a site.

Ask the following questions before appointing an estate agent or paying any reservation fee:

• Who will find and shortlist locations?
• Will the franchisor visit in person or assess photographs only?
• Who has the authority to give final approval?
• What information must the prospective franchisee provide?
• Are there site assessment fees, including for locations that are rejected?

Also ask which features would cause a location to be rejected. This list will help you avoid premises that look appealing but cannot meet the brand’s actual requirements.

2. Distinguish footfall from target customers

A busy street does not necessarily bring customers to your door. People passing through the area may not need your product, may not have time to stop or may struggle to park.

Visit the location at times that reflect your proposed trading pattern. For a concept that relies on office workers, observe the area at lunchtime and after work. For a family-oriented business, visit at weekends. Record the date, time and any unusual circumstances so that an exceptional situation is not mistaken for the normal pattern.

Use a simple checklist:

• Customers: Do people visiting the area match the brand’s target market?
• Access: Can customers enter, stop and leave easily?
• Visibility: Is the entrance clearly visible from the main route?
• Facilities: Are parking, public transport or pedestrian routes suitable?
• Surroundings: Do nearby businesses attract a complementary customer base?

If the building owner provides footfall data, ask when it was measured and which areas it covers. Figures for an entire shopping centre do not necessarily reflect the number of people passing your chosen unit. Use the information to inform your assessment, not as a guarantee of performance.

3. Separate brand approval from permission to operate

The franchisor’s approval means that it considers the location acceptable. It does not replace any licences or regulatory approvals required for the business activity and premises concerned.

Check with the local authority whether the premises can be used for your intended purpose and which business and signage licences are required. Depending on the concept and the building’s condition, obtain confirmation of any fire safety, hygiene or refurbishment requirements. The exact requirements can vary by location and activity; do not assume that approval for one outlet applies to another.

Have suitably qualified technical professionals assess the electricity supply, drainage, ventilation, storage space and delivery access. For a food business, for example, the kitchen position and extraction requirements may determine whether the brand’s required layout is feasible.

Malaysia regulates the franchise sector through the Franchise Act 1998, as amended, including the 2020 amendments. Official registration guidance also lists operations and training manuals among the application documents. However, the existence of manuals or franchise registration does not confirm that every proposed premises is suitable for use.

Ask the franchisor for the relevant site specifications. If access to the full manuals is restricted, obtain at least a list of technical requirements to review before making a financial commitment.

4. Document the decision before spending money

Prepare an assessment file for your chosen location. Include floor plans, photographs, customer observations, technical requirements, estimated adaptation costs and feedback from the authorities. Ask the franchisor to confirm in writing whether site approval is final or remains conditional.

Distinguish confirmed facts from assumptions. For example, a statement that “the electricity supply is sufficient” should be supported by an appropriate assessment, not merely an agent’s assurance that the previous tenant ran a similar business.

Before making any payment relating to the location, ensure that the payment documents explain its purpose, the recipient, the refund conditions and what happens if the site is not approved. Ask a solicitor to review how these commitments relate to the franchise purchase, particularly if the location has not yet been finalised.

Practical next step: proceed only once you have checked the customer fit, technical capability and approval process for the premises. The franchisor’s agreement matters, but your decision to buy still requires your own checks on the location.