Issues and challenges of unregistered franchise business: A Malaysian legal perspective

Abstract

The Malaysian Parliament had enacted the Franchise Act in 1998 and one of the main purposes of this Act is to monitor the registration and regulate franchise businesses in Malaysia to ensure that all the franchise businesses are following laws and regulation. Registration of franchisor (including registration of foreign franchisor) and franchisee has been stated in section 6 and 6B of the Franchise Act 1998. However, the Franchise Act 1998 is silent whether registration of a franchise business is mandatory. Meanwhile, the next issue is whether an unregistered franchise business established under a licensing or dealership agreement can register the franchise after the conclusion of the licensing agreement. The objective of this article is to look into the legal perspective of unregistered franchise business in Malaysia and suggest some proposals on how to overcome the legal issues of unregistered franchise business in Malaysia. This is qualitative study that involves a systematic study of philosophical and academic views through literatures. Therefore, this study is not an empirical study but rather a library study from various primary and secondary data sources. The study found that the Franchise Act 1998 may post a business risk to businesses intended to expand. As an innocuous venture agreement may end up becoming a franchise agreement, and an unregistered business owner may suddenly find himself at the short end of the stick, may be subject to the civil and criminal liabilities due to non-compliance of the Franchise Act 1998. As such, it is suggested that the Franchise Act 1998 should provide more monitoring and quality control over a potential franchise business before it is offered to protentional franchisees.@font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-536870145 1107305727 0 0 415 0;}@font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-536859905 -1073732485 9 0 511 0;}p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin-top:0cm; margin-right:0cm; margin-bottom:6.0pt; margin-left:0cm; text-align:justify; line-height:150%; mso-pagination:widow-orphan; font-size:12.0pt; mso-bidi-font-size:11.0pt; font-family:"Times New Roman",serif; mso-fareast-font-family:"Times New Roman"; mso-ansi-language:ES-MX; mso-fareast-language:EN-US;}.MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; font-size:11.0pt; mso-ansi-font-size:11.0pt; mso-bidi-font-size:11.0pt; font-family:"Calibri",sans-serif; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi; mso-ansi-language:ES; mso-fareast-language:EN-US;}.MsoPapDefault {mso-style-type:export-only; margin-bottom:8.0pt; line-height:107%;}div.WordSection1 {page:WordSection1;}