During the recent Franchise Awards Night organized by the Malaysian Franchise Association, the Deputy Prime Minister, Datuk seri Najib Tun Razak ("DPM"), was reported saying that the Government would continue to strengthen the franchise industry, which would include reviewing certain aspects of the Malaysian Franchise Act 1998 ("the Act").1
One aspect which merits serious attention is the registration process and guidelines. The practice adopted by the Registrar requiring 3 years' audited accounts of a Master Franchisee or Franchisee's operations effectively bars newly established companies from getting immediate registration as well as new franchises that have yet to operate for that duration. There are also no current remedies available in the Act to resolve conflicts arising between franchisors and franchisees. Further, whilst Part VII of the Act deals with enforcement issues and empowers the Ministry to enforce the Act, in practice, it remains to be seen. In the many years since the Act came into operation, no errant party has been charged for contravening any provision of the Act.
It was also mentioned during the speech that the Government plans to establish a franchise mediation centre to handle conflicts between franchisor and franchisee. The MeCD is also poised to set up a franchise enforcement unit to address the current shortcoming of the Act. At the time of writing of this article, such a unit has apparently come into existence though no further details have been provided by MeCD on the scope of work of the enforcement unit.
The revamp to the current franchise system and laws in Malaysia is greatly anticipated by all and it would augur well for the development of the franchise industry in the country, whether it lies in encouraging the growth and export of local franchises, or the investments of foreign franchises, if the improvements are in place without further delay.
1. The Star Newspaper, 13 November 2007.
Written by Sia Teng Teng
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