Buying a Franchise in Malaysia: Check Who Can Change the Manual

Before buying a franchise, look beyond the agreement itself. Pay attention to clauses requiring you to comply with the operations manual, including all future amendments. These clauses can affect your commitments even when the wording of the agreement remains unchanged. Standardisation helps maintain brand quality across a franchise network, but prospective franchisees need to understand who can change the rules, how changes are communicated and what limits apply to those powers.

1. Establish the manual’s contractual status

The operations manual usually explains how the franchise system works in practice. However, its effect on your obligations depends on the wording of the agreement. Look for phrases such as “forms part of the agreement”, “as amended from time to time” or “must comply with all instructions issued by the franchisor”.

These phrases need to be read together, not in isolation. A contract may state that amendments to the agreement require both parties’ consent, while also allowing the franchisor to change the manual unilaterally. The question is how far changes to the manual can add to your obligations without a signed amendment to the contract.

Ask for a list of the documents that bind you, including the operations manual, training manual, circulars and policies referred to in the agreement. For each document, record:

• Its title, version number and effective date.
• The contractual clause that makes compliance mandatory.
• Who has authority to approve amendments.
• Which document takes precedence if there is a conflict.

If the full manual is considered confidential, request controlled access or a review by your lawyer subject to confidentiality requirements. Do not assume you understand your obligations simply because you have received a sales summary.

2. Distinguish manual amendments from disclosure amendments

Malaysia specifically regulates franchising through the Franchise Act 1998, as amended, including the 2020 amendments, and related regulations. Registration guidance issued by Malaysia’s Ministry of Domestic Trade and Cost of Living (KPDN) lists the operations manual and training manual among the documents that must accompany a registration application, alongside the disclosure document and a sample franchise agreement.

This shows that the manuals are an important part of the registered system. However, submitting a manual to the Registrar does not mean that every future change is automatically permitted under your contract.

Under Section 15, the franchisor must provide the franchise agreement and disclosure document to a prospective franchisee at least 10 days before the agreement is signed. Use this period to compare references to the manuals with the commitments set out in those documents.

KPDN’s guidance on the format of disclosure documents also states that amendments to information in the disclosure document require the Registrar’s approval under Section 11. Distinguish this from routine manual updates: do not assume that every edit to a manual follows the same process.

If a manual amendment also changes disclosed information, ask the franchisor to explain whether the relevant approval is required and has been obtained. Seek legal advice if the answer is unclear. Contractual authority and legal compliance are two separate checks.

3. Test the limits of amendment powers with practical examples

Ask the franchisor to show you examples of previous manual changes, if available. The aim is not to resist improvements, but to understand how these powers are used in practice.

Distinguish minor technical changes from those that add substantive commitments. Correcting the sequence of steps in a hygiene inspection does not necessarily have the same impact as requiring you to subscribe to a new reporting system or send employees for additional training.

Consider a hypothetical example: the franchisor introduces a new reporting process that requires a software subscription and additional staff time. Ask:

• Which clause allows this change to be made mandatory?
• Was this category of cost explained before the purchase?
• How much notice is given before implementation?
• Can you request a transition period or temporary exemption?
• How are objections or requests for clarification handled?

An answer such as “all franchisees must comply” does not explain the contractual basis or the implementation process. Request a written answer referring to specific documents.

Warning signs include very broad amendment powers with no notification process, changes taking immediate effect without a clear reason, or a refusal to identify the version of the manual currently in use. These issues should be resolved before you take on long-term obligations.

4. Agree on records and procedures before signing

Discuss with your lawyer whether the contract needs to clarify the limits on amendments. Points for negotiation may include an official notification channel, a reasonable transition period and a process for dealing with changes that conflict with the main agreement. These are suggested contractual safeguards, not automatic rights necessarily granted by law.

Also request a procedure that distinguishes urgent changes, such as compliance or safety measures, from routine updates. This allows the brand to act when necessary without treating every amendment as a reason to bypass notice requirements.

Before signing, keep copies of the documents you have reviewed, or a record of their versions. If the manual is provided through a portal, ask whether you can access the amendment history and earlier versions. Make sure you identify who within your business is responsible for receiving notices.

Do not rely on verbal assurances that amendment powers “have never been used excessively”. If an explanation is important to your purchasing decision, ask for it to be recorded in the appropriate contractual document.

In short: before buying, identify which manuals bind you, the limits on the power to change them and the notification process. Sign only once you understand how your obligations may change throughout the franchise relationship.