Managing Franchise Sales Promises in Malaysia

When an established business starts offering franchises, the owner no longer handles every conversation with prospective franchisees. Sales staff may answer enquiries by telephone, at exhibitions or through messaging apps. Without clear limits on their authority, statements such as “head office will take care of everything” can create expectations the business cannot meet. To build a trusted franchise network, put controls on sales promises in place before the team starts recruiting.

1. Define what can be promised

Start by listing the topics prospective franchisees commonly ask about: opening assistance, staff training, marketing support, recruitment and help when sales are slow. For each topic, specify the actual scope of support and who has authority to approve it.

Distinguish between explaining an approved offer and changing the offer. Sales staff can explain the training already included. However, they should not promise unlimited additional training, fee waivers or permanent support staff without approval from the person responsible.

Use three categories in your internal guidance:

• May be explained: benefits and responsibilities already approved as part of the franchise offer.
• Must be referred for approval: special requests requiring operational, financial or legal assessment.
• Must not be promised: outcomes that cannot be guaranteed, such as regulatory approval or a successful finance application.

For example, “we help you review the requirements for opening” is not the same as “we guarantee your premises can open on your chosen date”. Make sure the team understands this distinction rather than simply memorising a script.

2. Build legal boundaries into the sales process

Franchising in Malaysia is governed by the Franchise Act 1998 (Act 590), including amendments that came into force in 2022. The Act regulates registration, disclosure and aspects of the relationship between franchisors and franchisees.

Under Section 6, a franchisor must register the franchise with the Registrar of Franchises before offering it for sale. Do not let sales targets run ahead of registration status. Before the team circulates any offers, appoint someone to confirm that registration has been obtained and that the offer materials may be used.

Section 15 requires the franchisor to provide a copy of the franchise agreement and disclosure documents at least ten days before the franchisee signs the agreement. Section 18 requires the franchise agreement to be in writing and to contain mandatory provisions. Summaries sent through messaging apps or verbal explanations are not substitutes for these documents.

Turn these obligations into working instructions: sales staff must not promise immediate signing when the disclosure requirements have not yet been met. Nor may they suggest that a legal requirement can be waived simply because the prospective franchisee agrees.

Controls over scripts, limits on authority and records of conversations are recommended management practices; they are not all specific obligations set out in the Act. Seek legal advice whenever a promise or exception could alter contractual rights.

3. Prepare accurate answers and a clear approval process

Build an answer guide around questions prospective franchisees actually ask. Avoid broad phrases such as “full support” without explaining what they mean. Specify the assistance available, the circumstances in which it is provided and what remains the franchisee’s responsibility.

For example, if recruitment assistance covers only job advertisement templates and interview guidance, do not present it as a service that supplies an entire workforce. If opening assistance depends on an agreed schedule, do not promise that the head office team will attend on any chosen date.

For special requests, use a simple form recording:

• the prospective franchisee’s request and the reason for it;
• the cost and operational impact;
• who assesses and approves the request;
• the written response that may be shared with the prospective franchisee.

Sales staff can say, “This request needs to be reviewed; we will give you a decision in writing.” That is safer than agreeing on the spot and later having to withdraw the promise.

If an exception is approved, ask a lawyer to determine how it should be recorded in the appropriate documents and assess any implications for registered documents. Do not use side letters as a shortcut to avoid legal obligations.

4. Record, review and hand over commitments to the operations team

Keep summaries of important conversations in a prospective franchisee’s record that relevant staff can access. Note questions, answers, special requests and outstanding decisions. After key discussions, send the prospective franchisee a written summary so that misunderstandings can be corrected early.

Before signing, check for any unresolved promises made in messages, presentations or conversations. If a member of staff has provided incorrect information, correct it clearly and seek advice on the next steps. Do not assume the mistake ceases to matter simply because the agreement says something different.

After signing, hand over the record of approved commitments to the operations team. The team supporting the opening needs to know what assistance has been agreed, who will provide it and what requires action from the franchisee.

Assess sales staff on the accuracy of their explanations and the quality of their handovers, not just the number of agreements signed. Regular reviews of a sample of communications can identify misleading phrases before they become habitual.

Practical action: before recruiting your next prospective franchisee, prepare a one-page guide to sales authority limits, an answer guide and an approval log for special commitments. Make sure every commitment has someone responsible who can deliver it.