Franchise Malaysia Guide

A franchise lets you run a business under an established brand, using its proven system, its trademarks and its support, in exchange for an upfront fee and ongoing royalties. In Malaysia this whole relationship is governed by one law: the Franchise Act 1998, which provides for the registration, administration and enforcement of franchise businesses.

The regulator is the Registrar of Franchises (ROF), which runs the Franchise Registry under the Ministry of Domestic Trade and Cost of Living (KPDN). Malaysia is one of the few countries in Asia with a dedicated, registration-based franchise law, so the rules here are stricter and more formal than a simple business licence.

This guide covers three journeys:

• How to buy a franchise in Malaysia and become a franchisee, including what to check before you sign.
• How to franchise your business and register as a franchisor.
• The costs, the legal protections, and the agencies that support the sector.

Franchising sits on top of ordinary company setup. You still register a company, sort out tax, licensing and hiring the normal way. For that groundwork (SSM registration, business structures, corporate tax and staffing), see the Malaysia business guide. If you are bringing a foreign brand into Malaysia through a local entity, the foreign company guide covers incorporation for overseas owners. This guide focuses only on the franchise-specific layer.

The three main roles under the Act

Not every branded business deal is a franchise in law. Under the Franchise Act 1998, an arrangement is a franchise only if all four of these elements are present:

1. The franchisor grants the franchisee the right to operate a business under its system.
2. The franchisee gets the right to use the franchisor's marks, trade secrets or intellectual property.
3. The franchisor keeps continuous control over the franchisee's operations.
4. The franchisee pays a fee or other consideration.

Miss any one of these limbs and the deal is legally not a franchise, so the registration, disclosure and protection rules below do not apply.

Franchise vs licensing vs dealership

This distinction matters because it decides which rules bind you.

Only the franchise, with continuous franchisor control over an entire business system plus IP and a fee, triggers mandatory ROF registration, disclosure and the statutory protections. A plain trademark licence or a product dealership does not. If someone offers you a "franchise" that is really just permission to resell their product, you lose the legal safeguards a real franchise carries, so check which one you are actually being sold.

Registration is the heart of the Act. A franchise must be registered with the Registrar before the franchisor can operate the franchise or make any offer to sell it in Malaysia. Selling first and registering later is not allowed.

MyFEX 2.0

All applications, for franchisor registration, franchisee registration and renewals, are submitted through the MyFEX 2.0 online portal at myfexv2.kuskop.gov.my. MyFEX 2.0 launched on 29 July 2022 and replaced the older MyFEX 1.0 system. There is no paper-first route; the portal is the front door for everything.

Who registers under which section

The Act spreads the registration duty across several parties:

The key point for overseas brands: a foreign franchisor has a two-step path. It must obtain the Registrar's approval under Section 54 first, and only then register under Section 6(1). A local franchisor or master franchisee skips straight to Section 6(1).

Since the 2020 amendments, the franchisee is no longer a bystander. You have your own registration duty, and getting it wrong is now a criminal matter.

When you must register

The deadline depends on whose franchise you are joining:

Registration is now compulsory and enforced

The Franchise (Amendment) Act 2020 came into force on 28 April 2022. It added new Sections 6A and 6B, which make it a criminal offence for a franchisee to fail to register. This is a real change: registering as a franchisee is a legal obligation, not an optional formality.

Existing franchises were given a three-year grace period running from 1 August 2022 to re-register under MyFEX 2.0, with a final deadline of August 2025. If you are joining an established brand, ask to see proof that both the franchisor's registration and your own franchisee registration are current on MyFEX 2.0.

Your step-by-step path as a buyer

1. Shortlist a brand and request its disclosure document.
2. Review the disclosure document and the draft agreement (with a lawyer) during the mandatory pre-signing window.
3. Sign the franchise agreement, keeping the cooling-off period in mind.
4. Register as a franchisee on MyFEX 2.0 within your deadline (before starting for a foreign brand, within 14 days for a local one).
5. Set up the company, licences and bank account the normal way. See the business guide for that groundwork.

The Act front-loads protection for the buyer through two documents and a cooling-off right.

The 10-day disclosure rule

The franchisor or master franchisee must give the prospective franchisee a copy of the franchise agreement and the disclosure document at least 10 days before the agreement is signed. That window exists so you can read the terms and take professional advice before committing.

What the disclosure document must contain

Since the 2022 amendments there is no fixed prescribed format for the disclosure document, but franchisors must follow the MyFEX 2.0 template.

Mandatory clauses in the agreement

The franchise agreement must contain the mandatory clauses set out in Section 18. These include a cooling-off period of at least 7 working days, during which the franchisee may terminate the agreement and get a refund of amounts paid, less the franchisor's reasonable expenses of preparing the agreement.

Minimum term and renewal

A franchise agreement must run for a minimum term of 5 years. If the franchisee is not in breach, the franchisor must renew on terms no less favourable than the original agreement, under Section 34. That protects a franchisee who has built up an outlet from being pushed out at the end of a short term.

Termination: only for good cause

A franchisor may only terminate for "good cause" under Section 9. Good cause includes failure to remedy a breach within 14 days' written notice, an assignment for the benefit of creditors, abandoning the business, or a criminal conviction that damages goodwill. Even then, the franchisor must give at least 6 months' notice or compensation before terminating, under Section 25.

Franchise economics have two layers: what you pay to get in, and what you keep paying to stay in.

The upfront and ongoing structure

Entry cost varies widely by brand. The upfront application-plus-franchise fee in Malaysia runs from about RM15,000 to RM1 million. On top of that, royalties are commonly around 4-5% of gross sales, charged monthly, and a marketing or advertising levy of a few percent is usually added as well.

Understand the difference: the franchise fee is a one-off payment for the right to join the system, while the royalty is a recurring cut of your sales that keeps flowing to the franchisor for the life of the agreement.

Real Malaysian examples

These figures are indicative and set by each brand; confirm current terms directly with the franchisor.

Homegrown bubble-tea brand Tealive has grown to around 800 outlets across 9 countries, which shows how far a Malaysian franchise system can scale.

When you compare offers, look past the entry fee. A brand with a low franchise fee but a high royalty and ad levy can cost more over a 5-year term than one with a bigger upfront and lower ongoing cuts.

Registration is not a one-off event. It has to be kept live, and the penalties for getting it wrong are real.

Penalties for not registering

Failure to register a franchise can result in fines and, for companies, penalties commonly ranging from RM10,000 to RM50,000. The amended Act also carries imprisonment of up to three years for certain non-registration offences, plus suspension, termination or cancellation of registration.

Registration validity and renewal

Let a registration lapse and you cannot lawfully keep operating or selling the franchise, so the renewal calendar matters as much as the first application. Annual reports are the routine upkeep that keeps your registration in good standing.

If you run a successful business and want to grow it by letting others operate under your brand, you become a franchisor. Under the Franchise Act 1998 that is a regulated status with its own duties.

The core sequence

1. Build the system. You need a repeatable business model, protected trademarks and IP, and an operations manual, because "continuous control over a system" is one of the four legal elements of a franchise.
2. Prepare the documents. Draft a franchise agreement with the Section 18 mandatory clauses and a disclosure document that follows the MyFEX 2.0 template.
3. Register under Section 6(1). A local franchisor (or master franchisee) registers under Section 6(1) through MyFEX 2.0. You must be registered before you operate the franchise or offer it for sale.
4. Recruit and disclose. Give each prospect the agreement and disclosure document at least 10 days before signing, and honour the 7 working-day cooling-off period.
5. Maintain registration. Renew every five years and file annual reports within six months of the fiscal year end.

Pre-franchising support

You do not have to work this out alone. Perbadanan Nasional Berhad (PNS / Pernas) is the government agency mandated to lead franchise development in Malaysia and specifically assists pre-franchisors turning a single business into a franchise system, alongside master franchisees and local Bumiputera entrepreneurs. See the support section below.

The general company, tax and hiring setup underneath your franchise still follows the standard route in the business guide.

Two institutions anchor the sector, one government and one industry.

PNS (Perbadanan Nasional Berhad / Pernas)

PNS is the government agency mandated to lead franchise development in Malaysia. It offers a broad toolkit:

• Franchise financing and equity investment
• Training and advisory services
• Property leasing for franchise outlets
• Support for pre-franchisors, master franchisees and local Bumiputera entrepreneurs

If you need capital to buy into a franchise or to franchise your own business, PNS is the first stop for franchise-specific financing.

MFA (Malaysian Franchise Association)

The MFA is the industry body for franchisors and franchisees. It:

• Maintains a business directory of franchise brands
• Runs entrepreneur development programmes (historically alongside PNS and MARA)
• Publishes franchise industry data

For a buyer, the MFA directory is a useful way to find and sanity-check brands, and its data helps you gauge how a sector is performing before you commit.

Franchising is a sizeable part of the Malaysian economy, and it has been growing steadily.

Scale and growth

Malaysia's franchise industry was projected to be worth over RM46 billion by 2025, contributing more than RM36 billion to GDP (2022) and growing at roughly 15% per year over the prior five years. The sector supports more than 80,000 jobs.

Registered players (2021 data)

Franchise premises (2021)

The mix of homegrown brands like Tealive and Marrybrown alongside 408 registered foreign franchisors shows a market that both grows its own systems and imports established ones. For a prospective franchisee, that breadth means real choice across price points and sectors.