Acknowledgement

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Franchising in Malaysia is governed by the Franchise Act 1998 (Act 590), which imposes mandatory registration requirements on franchisors. Compliance is essential to ensure legality, enforceability, and sustainability of franchise operations. 

Section 6 – Registration of Franchisor Section 6 of the Franchise Act 1998 requires a franchisor to register its franchise with the Registrar before operating or offering the franchise in Malaysia. 

Section 6(1) states that: “No franchisor shall operate a franchise business or make an offer to sell a franchise unless the franchise is registered. 

Section 10 - requires a franchisee to register the franchise with the Registrar of Franchises. 

Section 15 –  provides that franchise agreements must be in writing and contain prescribed terms, failing which the agreement may be invalid. 

Section 18 – requires franchisors to provide disclosure documents to franchisees at least 10 days before the signing of a franchise. 

Section 39 – Provides penalties for non-compliance, including fines and imprisonment. 

Throughout the years, the courts have also been consistent on the legality of registration. 

Case: Dr HK Fong Brainbuilder Pte Ltd v SG-Maths Sdn Bhd & Ors [2021] MLJU 1512 

Brief Facts: The plaintiff, a Singapore-based franchisor, entered into franchise agreements in Malaysia without first registering the franchise under the Franchise Act 1998. 

Issue: Whether the franchise agreement was enforceable despite non-registration. 

Held: The High Court held that compliance with Section 6 is mandatory. Failure to register rendered the franchise agreement unenforceable. The court emphasised that the statutory requirement is not merely procedural but substantive. 

Legal Principle: Non-registration invalidates enforceability of franchise rights. 

Case: Public Prosecutor v La Kaffa International Co Ltd [2015] MLJU 1769 

Brief Facts: La Kaffa International, the operator of the Chatime brand, was investigated for operating franchise outlets without proper registration. 

Issue: Whether operating without registration constitutes an offence. 

Held: The court upheld enforcement action, confirming that failure to comply with registration requirements constitutes an offence under the Act. 

Legal Principle: Strict compliance is required; ignorance is not a defence. 

Case: Naza Motor Trading Sdn Bhd v Cycle & Carriage Bintang Bhd [2019] 5 MLJ 1 

Brief Facts: The dispute involved issues of commercial disclosure and fairness in a business relationship. 

Held: The Federal Court emphasised the importance of transparency and good faith in commercial dealings. 

Application to Franchise: Supports the requirement under Section 18 for full disclosure to franchisees. 

The Franchise Act 1998 imposes strict compliance obligations, particularly under Sections 6, 15, 18, and 39. 

Case law confirms that failure to comply may render agreements unenforceable and expose parties to penalties. 

Obtaining a franchise licence is therefore essential for: - Legal validity 

- Enforceability 

- Protection of stakeholders 

- Sustainable business growth 

All references remain the property of their respective sources. This document is for informational purposes only and does not constitute legal advice.