Starting a Franchise Business in Malaysia

Taking the initiative to launch a brand-new enterprise is a challenging undertaking that calls for significant investment of your time, energy, and money. Applying for a franchise licence might be the best option if you do not want to follow the standard procedures.

What is a Franchise Business?

Franchising is described as the practice of expanding a firm and distributing its wares through a licensing relationship. Franchise businesses are those in which the owners (also known as "franchisers") sell the rights to use the franchise's trademarks (such as its name, logo, and business model) to other businesses (known as "franchisees"). Increasingly, companies are turning to franchises to assist them in expanding. McDonald and KFC are two examples of well-known franchise business models. 

The Essentials That You Need to Be Aware Of

While there are many pros to franchising, you should also be aware of the potential cons before making any commitments. 

The Pros of FranchisingThe Cons of Franchising
  • Reputable & trustworthy brand
  • Up-front costs
  • Easier management
  • Less restrictions on franchisees
  • Minimized growth risk
  • Royalty payments
  • The business plan for a franchise is already made
  • Top Franchises in Malaysia


    Step 1 - Conduct a survey

    The first step is to determine whether the market needs what you want to offer. Because you will be running your company like any other, you may expect to face competition. Furthermore, franchises typically include an exclusive region. Which implies that you can be competing against other franchisees of the same brand in addition to competing with other companies. 

    For this reason, surveying and other forms of market research should be undertaken. Should we expect people to want another outlet like this? How strong is the competition? Questions like these are important since the responses will gain insight on the provided region and customer base. 

    Step 2 - Participate franchise events

    Once you've established that there's a substantial market for your product, you may want to take a step back and gain a bird's-eye view of the industry. Franchise events are a great method to obtain a sense of the market and your opportunities. Typically, franchisers, franchise mediation businesses, or franchise regulatory agencies would host such gatherings to find new franchisees. 

    These events are excellent opportunities to meet with representatives from all three parties and discuss the many venues available for your event. But tread carefully, since franchise booths are often staffed by salespeople who will attempt to persuade you that their franchise is the best. If you can manage this, though, a franchise event is an excellent opportunity to test the waters. If you haven't already, this may be a good moment to focus on a certain industry.

    Step 3 - Conduct online research

    After concentrating in on a huge market, thorough research is essential. You'll need to put in a lot of effort to find the best franchise opportunity for your chosen industry. To help you narrow down your choices, we've outlined a few key considerations you should examine while evaluating franchise opportunities:

    • Preliminary fee for entrance
    • Royalties
    • The share of sales paid to the franchiser each year
    • Rental of software
    • Equipment maintenance
    • Auditing
    • Operations management
    • Initial inventory
    • Store construction costs
    This information is widely available and may be obtained mostly through franchise offerings that are posted on franchiser websites. Assuming you have obtained all this data, your first comparison is in order. Analyse all the potential franchises in your industry and eliminate those that are either too expensive or not accessible in your area.

    That should help you cut down your options considerably. At this point, you should have no less than five potential franchise opportunities left to consider. Next, do a comprehensive business analysis of the remaining companies.

    Learn as much as you can about these companies as if you would own them. If the businesses are listed on a public exchange, you should have easy access to all relevant data. Relevant topics include annual reports, financial statements, market challenges, and future projections. Focus on franchise turnover percentages. You are probably signing up for a bad deal if most new franchisees fail within the first few years.

    Key performance indicators (KPIs) are a useful tool for interpreting all this data. What key performance indicators (KPIs) are most relevant to your field may be found with a quick internet search. Hire an accountant to assist you out if you lack business knowledge or are having trouble keeping track of your finances. If you want to avoid accepting a bad franchise offer, a comprehensive background check might be invaluable.

    Step 4 - Go to franchises

    Since you now have a good foundational knowledge of these businesses, it is time to do some exploring of your own. Try to internalize the vibe of the locations you visit. Although you may have been to McDonald's a hundred times before, your impression of the restaurant will change significantly if you are there in search of a commercial opportunity.

    Learning about proved to be successful is essential. How is the staff managed? The typical wait time is. How crowded is it throughout the day? What if that restaurant franchise that seems like a breeze to run and promises consistent profits turns out to be a ghost town throughout the day? The simplest way to find out is to go see for yourself.

    Local managers aren't often pleased with their franchise agreement, but if you can convince them otherwise, you could get some juicy details about the franchise's inner workings. 

    Step 5 - Discuss with former of franchisees

    A valuable resource is a former franchisee of the brand you want to join. You may learn a lot from their wealth of knowledge about franchising in general and this specific business model. Where should we be wary? Exist any issues with the business model? Why, above all else, did they decide to leave?

    Step 6 - Ask for advice from the Malaysian Franchise Association (MFA)

    The government of Malaysia recognized the positive impact of a high franchise rate on the economy in the early 1990s. The government of Malaysia responded by forming the MFA to facilitate the development of a business climate conducive to franchises. Franchisers are committed to the success of their franchisees; therefore, they host the event, provide resources, and provide training to assist them grow their companies. In the early stages of a company's development, they may be an invaluable source of information and assistance.

    Step 7 - Consult professionals include consultants and lawyers

    You have choices, including speaking with your own lawyer and an outside franchise consultant. Lawyers who focus on franchise law are the ones to contact. These lawyers have different insights that your normal defense adviser may overlook. Or the franchiser may hire a franchise consultant to help interested parties through the legal requirements of establishing a franchise. You won't have to shell out money up front since the consultant will be compensated by the franchiser. 

    Step 8 - Start by creating a business plan

    Hopefully, by now, you have made up your mind on which franchise to join. Create a business plan now. Your company's future may be mapped out in detail in a document called a business plan. You might think of this paper as your business's blueprint. A convincing business plan might help you get the financial support you need to launch your business.Outside of that, however, it may serve as a road map for the launch and early development of your business.

    Because of the high level of uncertainty surrounding your organization's future success, writing a good business plan is a difficult challenge. The revenue and profit estimate you provide should be modest, and you should incorporate a thorough scenario and risk analysis. Although the details of what makes for a great business plan are likely further than the scope of this essay, realize that your franchiser is an asset. If you ask, they probably have a sample business plan you may use as a guide.

    In addition, the franchiser likely has a collection of data from other franchisees that, when correctly evaluated, may help you refine your own revenue estimates. In addition, the franchiser likely has a collection of data from other franchisees that, when correctly evaluated, may help you refine your own revenue estimates. It is possible that after going through this process, you may realize that your planned company is not feasible. That's good, too; it's far better to find out now than after you've already started your company. We've provided some guidelines for getting started with your business strategy, including:

    • Definition of the Company in General
    • Operating: a description of products and services, employees and hours, and suppliers
    • Analyzing the marketing mix; developing a brand strategy; including customers
    • Examining the lawfulness of the proposed business structure and the surrounding legal climate
    • Financial: capital required / break-even point / revenue estimations / preliminary financial statements
    • Risk management strategies / Insurance framework

    You can see now how much work goes into launching a franchise. Before entering headfirst into the franchise industry, it's important to do your research. As a result, your company's chances of success are probably going to increase.

    After detailing the steps to start franchise business in Malaysia, you'll surely want to recap them in brief.

    Are you all set to start? Now that you know how to start a franchise business in Malaysia, let's get started on your franchise and incorporate your business right away with Altomate. Contact us right away if you need help forming a company.

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    If you're looking to form an Sdn. Bhd. in Malaysia, or have any other questions on starting your business, contact the team at Altomate.

    We're here to answer any questions, provide resources, and give you the exact answers you need to get your business to the next level. We thank you for reading this article and hope it gave you some new thoughts and business ideas to move forward with.

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