We assist owners to identify suitable expansion methods

Which is required for the success of the organisation in the development of the businesses prototypes and management system.  Working closely with our clients, we convert their successful prototypes into viable Franchising or Licensing packages – from the drafting of their Franchise / License agreements, to the painstaking documentation of their operational and training procedures in order to produce Franchisee-friendly operational and training manuals.

We assist owners to identify suitable expansion methods

Which is required for the success of the organisation in the development of the businesses prototypes and management system.  Working closely with our clients, we convert their successful prototypes into viable Franchising or Licensing packages – from the drafting of their Franchise / License agreements, to the painstaking documentation of their operational and training procedures in order to produce Franchisee-friendly operational and training manuals.

The Difference between Franchising and Licensing

Franchising
Aspect
Licensing
Franchisor and Franchisee have a closer and ongoing relationship, with support and control from the Franchisor.
Relationship
Licensor and Licensee have a more arms-length relationship, with the Licensor providing rights to use intellectual property (i.e. trademark etc).
Franchisee replicate the Franchisor's entire business format including use of trademark, technical know-how, trade secret, confidential information, operations and quality standards.
Business Format
Licensee typically use specific intellectual property granted by the Licensor in their own business, but have more flexibility in overall operations.
Franchisee have less flexibility in making significant changes to the business model, as they must adhere to the Franchisor's prescribed system and standards.
Business Flexibility
Licensee typically possess increased flexibility to customize and modify the know-how to align with their specific business requirements.
Franchisor exercises significant control over Franchisee, including operating procedures, marketing, and quality standards.
Control
Licensor has less control over how the Licensee operates its business, (except focusing mainly on protecting intellectual property).
Franchisor provide on-going assistance, support and training to the Franchisee in various aspects of the business during the term of agreement.
Support
Licensee may receive initial training or support, but generally have less ongoing support from the Licensor.
The term of Franchise Agreement must be 5 years or more.
Term
The term of License Agreement generally lasts less than 5 years.
Franchisee typically pay an upfront franchise fee, ongoing royalties, and may contribute to marketing or advertising funds.
Fee
Licensee usually pay an upfront license fee or ongoing royalty, but typically have less financial obligations compared to Franchisee.
Franchising in Malaysia is regulated by the Franchise Act 1998 & the Franchise (Amendment) Act 2020 which imposes specific disclosure and registration requirements on Franchisor and Franchisee.
Legal framework
License in Malaysia is subject to general contract and intellectual property laws, with no specific Licensing regulations.
It is Compulsory to register your Franchise with The Ministry of Domestic Trade and Cost of Living ( MDT a.k.a KPDN ) in Malaysia.
Registration
There is no mandatory registration for License but Recordal of License Agreement with Malaysia Intellectual Property Office (MyIPO) is strongly advisable.
The Potential Franchisor is required to operate the business under private limited company namely “Sdn. Bhd.”

A minimum of 3 years of audited accounts is required.


Own and operate a prototype outlet for a minimum of 6 months.
Requirement
The Potential Licensor does not need to operate under private limited company.

There are no minimum years of operation required before entering into License Agreement.

A prototype outlet is not necessary.
A restraint of trade clauses in Franchise Agreement against the Franchisee after their termination is enforceable and upheld by the court under the Franchise Act.
Effects on Restrain of trade
A restraint of trade clauses against the Licensee in License Agreement usually would not recognise by the court in Malaysia.

The Difference between Franchising and Licensing

Franchising

Complete business package (including technical know-how) will be shared with the franchisee.

Continued assistance and guidance must be provided by the franchisor to the franchisee.

Bounded by the Franchise Act 1998.

A Franchise agreement has to be at least five years long.

Compulsory to register a franchise.

Only available to business that have been operating as a Sdn Bhd for at least three years.

A stringent franchisee selection process is usually done.

Trademark filing is required.

Licensing

Only brand name will be shared with the licensee.

Only the technical/product knowledge training will be given at the beginning by the licensor and then it is up to the license to run the business on his own.

Governed by the Contract Law.

A licensing agreement generally lasts less than five years.

Recordal of license agreement (advisable)

Sole proprietors can also opt for licensing.

The licensee selection process is usually less stringent than the one done for franchisee.

Not necessary to secure a registered trademark™.

Grow your business smartly

That is why it is no surprise that Franchising is a favourite ultimatum for business owners to expand their businesses. It has been used by many successful businesses as a powerful tool to leverage their businesses and to penetrate the market with lesser capital investment and effort.

Our Satisfied Clients

Frequent Asked Questions

What is Franchising?

Franchising is a method of expanding your business by licensing your intellectual property rights such as trade mark or trade name to a franchisee who pays you a certain amounts of fee to operate the business using your specific business system or know how at a specified period of time. The franchisee shall conduct its business operations in accordance with proven standards and specifications that have been well established.

What are the advantages of Franchising to a Franchisor?

The advantages are:

 

  • Franchising will allow you to expand your business without expending significant capital per unit.
  • Franchising also allows you to grow your business at a more rapid pace than you would generally be able to do on your own.
  • Franchising reduces your exposure to risks relating to signing leases, additional financing and vicarious liability for employee acts.

Is the registration of a franchise compulsory?

Yes, the registration of Franchise is compulsory by virtue of Section 6(2) of the Franchise Act 1998. The section provides that all franchises must be registered with the Registrar of Franchise before the Franchisor can offer to sell it in or outside Malaysia. Failure to comply with this provision is an offence under the Act.

What is licensing?

Licensing is one of the most popular methods of business leveraging strategies after Franchising. In general, Licensing is a permission given by the licensor or authorize the licensee the legal rights to use the brand name, logo, product, technology, inventions and/or works of expression for commercial purposes, sparing the license from a claim of infringement brought by the licensor.

What are the benefits of Licensing for Licensors?

There are many benefits, among others are:

 

  • increase the brand presence at retail or distribution outlet
  • create further brand awareness to support the core products or services
  • support and enhance the core values by associations with the licensed products/service or category (e.g. association with a healthy food product)
  • enter new markets (consumer or geographical) which were unfeasible via its own resources or capabilities
  • generate new revenue streams, with little involvement or additional financial or other resource implications

Is the licensor required to register his licensing with the government of Malaysia?

No, so far there is no such provision of law required the licensor to do so in Malaysia.

Not sure which method suits your business expansion?

Registered Franchise Consultant

Solomon Lee

 

Tel: 04 229 1100

Email: enquiry@intellect-worldwide.com

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Ooi Lee San

 

Tel: 017 515 7100

Email: ifsb1@intellect-worldwide.com

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Joanne Loh

 

Tel: 04 229 1100

Email: enquiry@intellect-worldwide.com

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