Prepare Network Records for Franchise Disclosure in Malaysia

When an established business is ready to build a franchise network, its outlet count is often the easiest way to demonstrate experience. Yet that figure can be misleading if it combines company-owned premises, temporary locations and franchises that have not yet opened. Before preparing disclosure documents, build a network record showing which outlets are actually operating, who runs them and how this has changed over time.

1. Understand the role of network records in disclosure

In Malaysia, franchising is regulated under the Franchise Act 1998 (Act 590), including amendments that came into force in 2022. Section 6 requires franchisors to register their franchise before operating a franchise business or offering a franchise for sale. Section 7 sets out the documents required for a registration application, including a complete disclosure document.

Information about the franchise network forms part of the disclosure. Section 15 requires a copy of the franchise agreement and disclosure document to be given to prospective franchisees at least ten days before the agreement is signed. A picture of the network is therefore more than promotional material: it helps candidates understand the franchisor’s actual experience.

The internal records discussed here are a tool for preparing verifiable information. They are not a substitute for the disclosure form prescribed by the Registrar of Franchises. Check the current requirements through the MyFEX 2.0 registration process and seek a legal adviser’s review to determine which details need to be included.

Do not assume that every record field suggested below must be disclosed. The aim is to give your team a sound basis for answering questions and completing official documents accurately.

2. Build a master register with clear categories

Start with a single master register covering every location that has used the brand. Give each location a permanent code so that a change of outlet name or operator does not cause the same location to be counted twice.

Useful internal fields include:

• Location identity: code, outlet name and address.
• Operating arrangement: franchisor-owned, owned by a related company or franchisee-operated.
• Operating format: permanent shop, kiosk, temporary location or another format actually used.
• Key dates: opening, temporary suspension of operations, reopening or closure.
• Current status: active, not yet open, temporarily closed or permanently closed.
• Verification sources: internal records and relevant supporting documents.

Distinguish the date the agreement was signed from the date the premises began serving customers. A franchise that has been awarded but has not yet opened should not be counted as an operating outlet without explanation.

If the business does not yet have any franchisees, say so plainly. Experience of managing several company-owned outlets is still valuable, but it is not the same as experience of supporting independent business owners. Keeping these categories separate helps candidates assess the maturity of the franchise network they may be joining.

3. Record changes without erasing the history

A register showing only today’s active outlets does not explain how the network has developed. Keep a change log covering closures, relocations, changes of operator and changes of format. Do not overwrite old records in a way that loses the original history.

For example, an outlet may close to move to a nearby unit. If the old address is deleted and the new address is recorded as an additional opening, the number of openings may suggest more growth than has actually occurred. Link the two locations and explain that the change was a relocation.

Similarly, a franchisor-owned outlet that later becomes franchisee-operated does not necessarily represent an additional location. Record the change in operating arrangement and its date rather than simply counting it as a new outlet.

For each change, keep a brief, factual explanation. If the reason for a closure has not been confirmed, mark it as unconfirmed. Do not replace it with a more reassuring explanation.

Choose supporting documents to suit the circumstances: final sales reports, premises handover records, confirmation from the operator or relevant transfer documents. Restrict access to personal and commercial information; not all internal evidence needs to be shared with prospective franchisees.

4. Set an as-at date and review the information before use

Every network summary should have an as-at date. Phrases such as “current outlet count” become ambiguous when a document is circulated several months after it was prepared. State the date to which the data relates and use a consistent counting method throughout the summary.

Appoint one person to maintain the register, but obtain confirmation from those who know the actual operations. The operations team should confirm the status of the premises, finance should check evidence of trading activity, and those responsible for agreements should confirm the operator’s identity.

Before using the information, ask:

• Have locations that have not yet opened been separated from active locations?
• Have relocations or changes of operator been counted twice?
• Have temporary closures been explained correctly?
• Can every figure be traced back to a supporting list of locations?

Keep a dated copy of the summary used for each disclosure exercise. If changes occur after the documents have been prepared, consult an adviser about the need to update the information and obtain the Registrar’s approval where applicable. Do not assume that amending the internal spreadsheet alone fulfils the formal obligations.

Practical next step: build a location register this week, record ownership and operating status separately, then verify every entry against supporting evidence. A modest but clearly explained network count is more useful than a large total that is difficult to substantiate.