Buying a Franchise in Malaysia: Check Your Day-to-Day Obligations

Buying a franchise means more than acquiring the right to use a brand. You also take on a way of working that may dictate your daily schedule, staffing levels and involvement as an owner. Before entering Malaysia’s franchise market, check whether the brand’s operational obligations genuinely suit your availability, experience and resources. An appealing brand is not necessarily the right fit if the way it operates does not match your circumstances.

1. Understand how the manual fits into the agreement

Malaysia has specific legislation governing franchises: the Franchise Act 1998, which has been amended, including in 2020. Government registration guidance lists operations and training manuals among the documents that must be submitted with a registration application, alongside the disclosure document and a sample franchise agreement. These manuals are not simply reading material for after the purchase; their contents are essential to understanding the business system.

However, the requirement to submit manuals to the Registrar does not necessarily mean prospective buyers are entitled to receive the full confidential manuals before signing a contract. Ask for controlled access, a briefing or a written summary of obligations that could significantly affect your purchasing decision. If necessary, discuss a confidentiality agreement to allow a review.

Section 15 of the Franchise Act 1998 requires franchisors to give prospective franchisees the franchise agreement and disclosure document at least ten days before the agreement is signed. Use that review period to identify references to the manuals, rather than simply reading the list of fees.

Highlight clauses requiring compliance with manuals, operating instructions or policies that may change. Ask a lawyer to explain how these documents form part of your contractual obligations and which document takes precedence if there is a conflict.

2. Establish who must do the work each day

Do not assume that a franchise can be run as a passive investment. Some models may require the owner’s direct involvement, while others allow a manager to run the outlet. Get written confirmation of the requirements for the brand you are considering.

Use the following questions to build a picture of a typical operating week:

• Must the owner be on the premises, or can they appoint a manager?
• What opening hours and days are mandatory?
• Who must attend training and pass assessments before opening?
• Does a replacement manager need the franchisor’s approval?
• What daily, weekly and monthly reporting is required?
• How will operations continue when key staff are on leave or resign?

Then compare the answers with your actual circumstances. If you still work full-time, do not treat your spare time as a substitute for a required manager. If your partner will help, make sure their role is clear and based on a firm commitment rather than an assumption.

Ask to speak to existing franchisees about their actual routines, with their consent. Ask how much time they spend drawing up staff rotas, managing stock, preparing reports and dealing with inspections. The aim is to understand the workload, not to obtain trade secrets.

3. Translate each obligation into resource requirements

Once you understand the routine, create a review table with four columns: obligation, frequency, person responsible and cost. This will help you identify requirements that may look minor in the manual but demand ongoing resources.

For example, long opening hours may require several shifts and cover staff. Regular hygiene checks may involve a supervisor’s time, cleaning supplies and record-keeping. Daily sales reports may require a system subscription, an internet connection and user training.

Distinguish between start-up and recurring costs. Initial training does not necessarily include training for new employees following staff turnover. Ask who pays for travel, accommodation, reassessments or additional training if these are required.

Do not assign a zero cost to work you plan to do yourself. Record your time separately and estimate the cost of having a paid employee do that work instead. This will show whether the outlet could still afford to operate if you were ill or had family commitments.

Mark any costs that remain unknown as unconfirmed. Obtain quotations or written clarification before assuming your estimates are sufficient.

4. Check how instructions can change and how compliance is assessed

Operations manuals can evolve as products, technology or processes change. Before buying, ask who can amend the manuals, how notice is given and how long franchisees have to implement changes. Do not assume that every change requires your consent; this needs to be checked against the contract and the law.

Ask for an example of the operational inspection process. Are there checklists, assessment scores and deadlines for correcting shortcomings? Who receives the reports, and how can franchisees challenge inaccurate findings? A clear process helps both parties maintain standards across the franchise network.

Before signing, prepare a one-page summary of the main obligations and ask the franchisor to clarify anything that remains unclear. If an important promise conflicts with the contract or manuals, ask a lawyer to help record the agreed resolution in an appropriate document.

Practical step: Do not base your decision solely on how the outlet looks. Before buying a franchise, make sure you can explain who will perform each essential task, when it must be done and how its costs will be covered.