Managing Customer Complaints Clearly in Malaysian Franchise Networks

When you expand your business through franchising, customers usually see a single brand, not different outlet owners. An unresolved complaint at one outlet can undermine trust across the entire franchise network. Before offering franchises, establish a process that answers three questions: who receives complaints, who can approve a resolution, and who bears the cost? This process needs to work without the founder making every decision.

1. Distinguish legal responsibilities from internal arrangements

In Malaysia, franchising is regulated by the Franchise Act 1998 (Act 590), including amendments that came into force on 28 April 2022. The Act sets out general obligations for franchisors and franchisees, including cooperation to protect consumers’ interests. Complaint handling is one practical way to fulfil those responsibilities.

The franchise agreement can detail how duties are divided between the two parties. However, internal arrangements about who pays for refunds do not, in themselves, remove customers’ rights. The Consumer Protection Act 1999 (Act 599) is also relevant to consumer transactions within its scope, including guarantees relating to goods and services and the remedies available.

Avoid blanket policies such as “purchased goods cannot be returned under any circumstances”. An exchange policy for customers who change their minds must be distinguished from claims involving faulty goods or services that fail to meet the relevant guarantees. Have a lawyer review your policies so that staff do not use internal rules to deny statutory rights.

This complaints system is not a substitute for franchise registration. Section 6 of the Franchise Act 1998 still requires franchisors to register their franchise before operating a franchise business or offering it for sale.

2. Assign case owners and set limits on resolution authority

Start by mapping the channels through which complaints actually arrive: the counter, telephone, email, social media and delivery apps. Decide who monitors each channel and who provides cover when that person is on leave. Customers should not have to repeat their story to several people simply because their complaint has come through different channels.

Every case should have a case owner: an individual responsible for coordinating action and keeping the customer updated until the case is closed. The case owner is not necessarily the party that ultimately bears the cost.

Categorise cases according to the action required:

• Routine cases: incorrect orders, missing items or delays that the outlet manager can resolve within their written authority.
• Cases requiring approval: payment disputes, repeated claims or compensation beyond the manager’s limit, which should be referred to a named person.
• High-risk cases: allegations of injury, product contamination or safety threats, which should be reported immediately to the franchisor and other relevant parties, as appropriate.

Set internal targets for acknowledging complaints, providing updates and resolving cases. Distinguish these operational targets from any legally required time limits. Do not promise a resolution date before establishing which facts need to be investigated.

3. Allocate costs without burdening the customer

Before recruiting franchisees, discuss situations that can easily lead to disputes: a customer buys from one outlet but requests a refund at another; a centrally organised promotion is explained incorrectly; or a faulty product comes from a supplier specified by the franchisor.

For each situation, record four things: who deals with the customer, who approves the remedy, who makes the initial payment, and how costs are subsequently settled between the parties. Also specify the reasonable evidence required, such as a transaction record or product photographs, without placing unreasonable obstacles in the customer’s way.

For example, a customer receives an incomplete order through a delivery app. The manager checks the order and packing records, then offers a resolution within their authority. Any internal dispute over whether the mistake occurred in the kitchen or during delivery can be investigated separately, rather than used as a reason to leave the customer without a response.

Include key provisions on financial responsibility in the franchise agreement. Put working instructions and forms in the operating procedures. Avoid automatically imposing deductions on franchisees without a contractual basis, evidence and an opportunity for them to explain.

4. Test the process and use complaints to drive improvements

Before franchisees start using the process, run simulations with your existing outlet teams. Test complaints received outside office hours, customers who have no receipt but do have a payment record, and situations where the manager cannot be reached. Check whether staff know what to do next without calling the founder.

Use a single complaints register to record the date, outlet, issue, case owner, action taken, cost and outcome. Restrict access to customer information according to staff members’ duties. Do not share personal details in overly broad communication groups.

Review complaint patterns regularly. The same complaint across several outlets may indicate a problem with central instructions, packaging or promotional information, rather than simply poor performance by franchisees. Share agreed improvements across the franchise network without revealing customers’ identities.

Practical step: prepare a one-page matrix showing complaint types, case owners, approval limits and who makes the initial payment. Test it using anonymised real cases before handing responsibility to your first franchisee.