During the recent franchise seminar on the 22nd to 24th December 2021, a personnel from the Ministry of Domestic Trade and Consumer Affairs mentioned that the Franchise Act 1998 as amended mentioned that registration of franchise is permissible to any business even though the business was registered ONLY ONE YEAR.

He is not wrong nor right.

Interestingly, the Franchise Act 1998 (as amended) is silence on registration except in section 6 and 7 of the Act of which I shall reproduced below as follows:

6(1) A franchisor or a foreign person who has obtained an approval to sell a franchise in Malaysia or to any Malaysian citizen under section 54 shall register his franchise with the Registrar before he can operate a franchise business or make an offer to sell the franchise to any person.

6(2) Any franchisor or foreign person who fails to comply with this section, unless exempted by the Minister under section 58, commits an offence and shall, on conviction, be liable—….

AND

7(1) A franchisor shall make an application to register his franchise by submitting to the Registrar the application in such form as may be determined by the Registrar together with the prescribed fee and —

(a) the complete disclosure documents with all the necessary particulars filled in;

(b) a sample of the franchise agreement;

(c) …..

Nothing in the Act mentioned any the time frame for a would-be franchisor to register his business as a franchise under the Act.

However it is a known fact and as a matter of practice and prudence, the Registrar will permit registration so long as the franchise is in the business for at least 3 years. No prudent businessman will commit to any business relation unless and until due diligence of the franchise business is made. Efforts to study through the franchisor’s business plan and other documents are readily given to the would be franchisee. Similarly, a would be franchisee would not want to be part of a “fly by night business”.

Be that as it may, the only exception is an exemption by the Minister under section 58 whereby the Minister can waive, through this section the need for three years. I reproduce section 58 below:

58 The Minister may, by order published in the Gazette, exempt, subject to such conditions as he deems fit to impose, any person or class of persons or business or industry from all or any of the provisions of this Act.