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 Licensing or Franchising packages – from the drafting of their License / Franchise agreements, to the painstaking documentation of their operational and training procedures in order to produce Franchisee-friendly operational and training manuals. Additionally, we provide support in navigating the complex process of franchise registration, ensuring compliance with relevant regulations and requirements.
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. Additionally, we provide support in navigating the complex process of franchise registration, ensuring compliance with relevant regulations and requirements.
The Difference between Licensing & Franchising
Licensing | Aspect | Franchising |
|---|---|---|
| Licensor and Licensee have a more arms-length relationship, with the Licensor providing rights to use intellectual property (i.e. trademark etc). | Relationship | Franchisor and Franchisee have a closer and ongoing relationship, with support and control from the Franchisor. |
| Licensee typically use specific intellectual property granted by the Licensor in their own business, but have more flexibility in overall operations. | Business Format | Franchisee replicate the Franchisor's entire business format including use of trademark, technical know-how, trade secret, confidential information, operations and quality standards. |
| Licensee typically possess increased flexibility to customize and modify the know-how to align with their specific business requirements. | Business Flexibility | Franchisee have less flexibility in making significant changes to the business model, as they must adhere to the Franchisor's prescribed system and standards. |
| Licensor has less control over how the Licensee operates its business, (except focusing mainly on protecting intellectual property). | Control | Franchisor exercises significant control over Franchisee, including operating procedures, marketing, and quality standards. |
| Licensee may receive initial training or support, but generally have less ongoing support from the Licensor. | Support | Franchisor provide on-going assistance, support and training to the Franchisee in various aspects of the business during the term of agreement. |
| The term of License Agreement generally lasts less than 5 years. | Term | The term of Franchise Agreement must be 5 years or more. |
| Licensee usually pay an upfront license fee or ongoing royalty, but typically have less financial obligations compared to Franchisee. | Fee | Franchisee typically pay an upfront franchise fee, ongoing royalties, and may contribute to marketing or advertising funds. |
| License in Malaysia is subject to general contract and intellectual property laws, with no specific Licensing regulations. | Legal framework | 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. |
| There is no mandatory registration for License but Recordal of License Agreement with Malaysia Intellectual Property Office (MyIPO) is strongly advisable. | Registration | It is compulsory to register your franchise with the Ministry of Domestic Trade and Cost of Living (KPDN), pursuant to the Franchise Act 1998. |
| 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. | Requirement | 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. |
| A restraint of trade clauses against the Licensee in License Agreement usually would not recognise by the court in Malaysia. | Effects on Restrain of trade | 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. |
The Difference between Licensing & Franchising
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.
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Frequent Asked Questions
What is Licensing?
Licensing is one of the most popular business leveraging strategies, often considered before Franchising. It is a formal agreement in which the Licensor grants the Licensee legal rights to use the Licensor’s brand name, logo, product, technology, inventions, or creative works for commercial purposes. This permission protects the Licensee from potential infringement claims by the Licensor, allowing them to leverage the Licensor’s established assets while expanding their own market presence.
What are the benefits of Licensing for Licensors?
There are many benefits, among others are:
- Increase the brand presence in various sectors, including food and beverage (F&B), education, retail, and etc.
- Create further brand awareness to support the core products or services
- 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
What is the difference between Franchising and Licensing?
The Franchisor provides a comprehensive business package to the Franchisee, allowing them to operate the business under Franchisor’s trademark, technical know-how, trade secret, confidential information, operations and quality standards. This arrangement includes training and ongoing support services from the Franchisor. In contrast, Licensing involves less emphasis on maintaining a uniform standard and system among all Licensees, allowing for greater flexibility in how each Licensee operates their business.
What is Franchising?
Franchising is a way to expand your business by allowing others to use your entire business format, including trademarks, technical know-how, trade secrets, and operational standards. In this model, the Franchisee pays fees and runs the business according to the Franchisor’s established guidelines.
What are the advantages of Franchising to a Franchisor?
- Franchising allows business expansion without significant capital expenditure.
- It enables faster business growth than you could typically achieve on your own.
- It reduces risks related to signing leases, additional financing, and employee liability.
Is the registration of franchises compulsory?
It is compulsory to register your franchise with the Ministry of Domestic Trade and Cost of Living (KPDN), pursuant to the Franchise Act 1998.
Not sure which method suits your business expansion?
