Buying a Franchise in Malaysia: Your Own Franchisee Registration

A registered brand does not mean that all registration requirements for its buyers have been met. In Malaysia’s franchise sector, franchisees have their own registration obligations. Before buying, establish who is granting you the rights, which entity will sign the agreement and who will handle the application. Mistakes at this stage can lead to an opening schedule that overlooks outstanding compliance requirements.

1. Distinguish brand registration from franchisee registration

Malaysia has specific legislation governing franchising: the Franchise Act 1998, including amendments introduced by the Franchise (Amendment) Act 2020. The official registration guidance also lists the Franchise (Forms and Fees) (Amendment) Regulations 2022 and other relevant regulations.

Under this framework, a franchisor’s obligation to register its franchise does not replace a franchisee’s registration obligation. Similarly, registering a business or company with the Companies Commission of Malaysia does not, in itself, fulfil the requirements of the Franchise Act.

As a buyer, distinguish between three things in your due diligence records:

• The buying entity: the name of the individual or company that will be a party to the agreement.
• The franchisor’s registration: the registration status of the party offering the franchise rights.
• The franchisee’s registration: your own registration as the recipient of those rights.

If a sales representative says that “everything is already registered”, ask for written clarification of whose registration they mean. Do not assume that a certificate in the franchisor’s name also covers your company.

This check is about more than obtaining a copy of a certificate. Its purpose is to ensure that someone is clearly responsible for each obligation and that there is evidence it has been fulfilled.

2. Identify whether the local or foreign route applies

The registration route depends on the party granting you the franchise, not simply the brand’s country of origin. An international brand may be offered through a local master franchisee. Alternatively, a buyer may receive rights directly from a foreign franchisor.

Section 6A of the Franchise Act 1998 provides that a franchisee receiving a franchise from a foreign franchisor must apply for registration before starting the franchise business. The application is subject to approval by the Registrar of Franchises.

Section 6B requires a franchisee receiving a franchise from a local franchisor or local master franchisee to register the franchise within 14 days of the date the agreement is signed.

Do not, therefore, use the opening date of your premises as your only timing reference. Under the local route, the obligation is tied to the signing date, even if refurbishment has not yet begun.

Before setting a signing date, ask a lawyer to check:

1. The full name and place of incorporation of the party granting the rights under the agreement.
2. Whether that party is a franchisor or a local master franchisee.
3. The registration route that applies to the buying entity.
4. The date that triggers the obligation and the evidence you need to retain.

If the proposed arrangement involves several companies, seek confirmation from the Office of the Registrar of Franchises. The brand name on the sign alone is not enough to determine the correct route.

3. Prepare before the compliance clock starts ticking

The official guidance provides for registration through the MyFEX system. However, do not copy the franchisor’s application checklist and assume that every document on it is also mandatory for franchisees. Check the current application category, forms, fees and supporting documents that actually apply to you.

As part of your internal preparations, gather information about the buying entity, details of the party granting the rights, the relevant agreements and any premises information already available. Ensure that entity names and registration numbers are consistent across the documents. If a new company will be the franchisee, do not allow key documents to use the founder’s name without checking the implications.

Prepare a simple schedule with four columns: task, person responsible, target date and evidence of completion. Include obtaining documents from the franchisor, checking forms, submitting the application and responding to queries from the Registrar.

If the franchisor offers administrative assistance, ask for its scope to be set out in writing. Distinguish between preparing documents, submitting the application and monitoring the outcome. This assistance should not leave you without access to your own records.

Keep copies of submissions, receipts, reference numbers and decision letters. Proof of submission is not necessarily proof of approval, particularly where the applicable route requires the Registrar’s approval.

4. Make compliance part of your buying decision

Before committing to an opening, ask who will bear the administrative costs and who will handle requests for additional information. Also consider how registration delays could affect training, recruitment and pre-opening expenditure.

Do not accept assurances that registration can be “done later” without checking the statutory deadlines. For a direct purchase from a foreign franchisor, align the start of operations with the applicable registration and approval requirements. For the local route, prepare in advance so that you do not miss the 14-day deadline.

If you have already signed the agreement and are unsure of your registration status, promptly seek legal advice and guidance from the Office of the Registrar of Franchises. Do not alter document dates or assume that postponing the opening removes earlier obligations.

Practical step: before signing, obtain a one-page confirmation setting out your registration route, key dates, the person handling the process and the evidence of completion you will receive. Checking the franchisor’s registration is one task; your own registration is a separate responsibility.