Buying a Franchise in Malaysia: Check the Rights to Use the Trade Mark

When you buy a franchise, you pay to use an identity that customers already recognise. However, the name on the sign does not necessarily belong to the company receiving your franchise fee. In Malaysia’s franchise market, checking trade mark usage rights helps ensure that your investment in premises, packaging and marketing is backed by valid authorisation. The focus is not simply on whether the franchise is registered, but on who can grant you the right to use the brand.

1. Distinguish franchise registration from trade mark rights

Malaysia has specific franchise legislation: the Franchise Act 1998 [Act 590], including amendments in force. Section 24 addresses the registration of trade marks or service marks associated with a franchise. Trade mark protection and registration are also governed by the Trademarks Act 2019 [Act 815], administered by the Intellectual Property Corporation of Malaysia, or MyIPO.

These two matters must be distinguished. Registration with the Registrar of Franchises is no substitute for checking trade mark records. Equally, a trade mark certificate alone does not prove that all requirements for selling a franchise have been met.

Ask for a list of the marks your outlet will actually use: the business name, the main logo and, where relevant, product brands. For each mark, obtain the registration number, the registered owner’s name, its current status and the goods or services covered.

Do not rely on images of certificates in sales materials. Check current records through MyIPO or seek help from a registered trade mark agent. If an application is still pending, distinguish it from a registration that has already been granted. Ask a lawyer to assess the implications before you commit.

2. Trace authorisation from the owner to the franchisee

The trade mark owner’s name may differ from the franchisor’s because the brand belongs to a related company or an overseas owner. This is not necessarily a problem, but the relationship between the parties must be supported by evidence.

Establish a clear chain of authorisation: trade mark owner → licensee → franchise seller → your company. If the franchisor owns the mark, this chain is shorter. If a master franchisee is involved, make sure its rights include authorising other franchisees in Malaysia to use the brand.

Ask for documents or written confirmation addressing the following:

• Is the seller authorised to grant you the right to use the mark?
• Does that authorisation cover Malaysia and the business activities being offered?
• Will those rights remain in force throughout the promised period of use?
• Are there any outstanding conditions or approvals required from the owner?

If the original documents contain confidential information, suggest a review by a lawyer under confidentiality arrangements. An assurance that all the companies belong to the same group is no substitute for evidence of authorisation.

3. Make sure the scope of use matches your sales plans

The right to display a logo on a sign does not necessarily cover every way you intend to use the brand. Before signing, list the channels and materials you plan to use: premises, packaging, staff uniforms, social media accounts, delivery platforms and local promotional materials.

Then check each proposed use against the agreement and brand guidelines. Ask who approves materials, how long approval usually takes and whether digital accounts must be set up in the franchisor’s name or your company’s name.

Check the use of domain names and account names too. If you fund the development of an ordering page or produce product photographs, clarify in writing who owns those materials and who may use them. The right to use a trade mark does not necessarily give you ownership of all marketing materials.

Under Section 15 of the Franchise Act 1998, the franchisor must provide the franchise agreement and disclosure documents at least ten days before the agreement is signed. Use this review period to compare promises about brand use with the actual clauses. Do not assume that verbal permission to open a particular sales channel is sufficient.

4. Establish liability if brand rights are disputed

Imagine receiving a claim from a third party alleging that your use of the logo infringes its rights. The key question is not only whether the claim has merit, but also who will handle the defence and bear the costs while the matter is resolved.

Ask a lawyer to check whether the contract specifies who must receive notice of a claim, control the legal proceedings and pay the associated costs. Examine any protection or indemnity offered to the franchisee, including exclusions if you alter the logo without permission.

Discuss the practical consequences if use of the mark must stop or change. Who pays to replace signage, packaging and digital materials? How will branded stock that can no longer be used be handled? Does the contract provide a remedy if operations are disrupted? These are matters of risk allocation to be agreed, not automatic rights to compensation that you can take for granted.

Practical step: Before paying to join a brand, compile a file containing current trade mark records, evidence of the chain of authorisation and the liability clauses. If any of these is unclear, hold off on committing until you have written clarification.