Buying a Franchise in Malaysia: Check Whether You Must Run It Yourself

Buying a franchise does not necessarily mean you can hand the entire operation over to a manager. Some franchises may require the owner's personal involvement, while others allow management by an approved representative. Before entering Malaysia's franchise market, check whether the brand's demands on your time genuinely fit around your job, family and financial plans. Profits on paper can look attractive when the owner's time is treated as free.

1. Establish who must be on the premises

Start by asking the franchisor a direct question: does buying this franchise require me to work full-time in the business? Do not settle for answers such as “owners must be committed” or “you can appoint someone”. Ask the franchisor to point out the clauses specifying the involvement required.

Look for terms such as principal operator, approved manager, active involvement, daily supervision and full-time commitment in the draft agreement and relevant sections of the manuals. Distinguish the obligations of owning the business from those of carrying out its day-to-day work.

Record the answers to these questions:

• Must you attend in person, or is a manager's presence sufficient?
• Are there specified hours or a minimum number of days when you must be present?
• Can you keep another job or run another business?
• Is approval required before you delegate duties to a manager?
• Who is responsible when the manager is absent?

If you are buying through a company, check which individual is named as the operator. Do not assume that all directors or shareholders can automatically stand in for one another. Make sure the explanations given during the sales process match the documents that will bind you.

2. Test the actual work schedule, not just opening hours

Customer opening hours do not cover the entire working day. Preparing the premises before opening, accepting deliveries, counting cash, cleaning and reporting may take place outside those hours. Ask for a sample weekly work schedule for an outlet with an operating format comparable to the one you are considering.

Build a schedule showing who performs each task, including at weekends and on public holidays. Allow time for staffing matters, purchasing, maintenance and meetings with the franchisor. Mark any tasks that only the owner or an approved manager may perform.

Then test three scenarios: a normal week, a period of high demand and the absence of a key employee. If you end up filling every gap in the schedule, the franchise may require a full-time working commitment even if it is marketed as an investment you can manage remotely.

Also check who has the authority to set opening hours. Are they determined by the franchisor, the shopping centre management or both? Ask about the process for requesting temporarily reduced hours during staff shortages. Do not assume you can close early simply because sales are low on a particular day.

3. Include the value of the owner's time in your cost assessment

Prepare two financial scenarios before making a decision. The first should assume that you run the premises yourself. The second should include the cost of a manager and the staff needed to take over your duties. Use verifiable wage rates and actual costs, rather than assuming that family members will help without pay.

In both scenarios, separate payment for your work from the return on your capital. If there is only cash left over because you work long hours without pay, that figure should not be treated purely as an investment return.

Review the following items with an accountant:

• Pay for the manager, shift staff and relief staff.
• Employer contributions and other applicable employment-related payments.
• Recruitment and onboarding costs.
• An allowance for cover during leave or other absences.
• Reasonable remuneration for the duties you perform yourself.

Also ask whether appointing a manager requires a fee, an assessment or the franchisor's written consent. If specific qualification requirements apply, obtain an estimate of the time and cost involved in meeting them. A model that is only viable when the owner is always available should be assessed as a work commitment, not as the purchase of a passive income stream.

4. Make sure the contract allows for temporary cover

Malaysia regulates its franchise sector through the Franchise Act 1998 [Act 590], as amended, including by the 2020 amendments. Under Section 15, franchisors must provide prospective franchisees with the disclosure documents and a copy of the franchise agreement at least 10 days before the agreement is signed. Use this period to review any personal management obligations with a lawyer.

Official registration guidance also lists operations and training manuals among the documents required for a registration application. To assess your proposed purchase, ask for access to the sections covering the allocation of duties to owners and managers. Do not assume that verbal explanations override written terms.

Ask for a clear process covering leave, illness or a manager's resignation: who can step in, what documents are required, how notice must be given and who grants approval. Distinguish temporary cover from a permanent change of operator. Any specific flexibility should be properly documented and reviewed by a lawyer; do not assume it is an automatic legal entitlement.

Practical takeaway: Before buying, complete a task schedule, an estimate of replacement staffing costs and a procedure for the owner's absence. Proceed only when the time commitment required by the contract matches what you can realistically provide.