FRANCHISE ACT 1998

LAWS OF MALAYSIA ONLINE VERSION OF UPDATED TEXT OF REPRINT Act 590 FRANCHISE ACT 1998 As at 1 November 2023 This text is ONLY AN UPDATED TEXT of the Franchise Act 1998 by the Attorney General’s Chambers. Unless and until reprinted pursuant to the powers of the Commissioner of Law Revision under subsection 14(1) of the Revision of Laws Act 1968 [Act 1], this text is NOT AN AUTHENTIC TEXT. 2 FRANCHISE ACT 1998 … … … 24 December 1998 Date of publication in the Gazette … … 31 December 1998 Latest amendment made by Act A1617 which came into operation on … … … Date of Royal Assent … … … 28 April 2022 PREVIOUS REPRINTS First Reprint … … … 2002 Second Reprint … … … 2006 3 LAWS OF MALAYSIA Act 590 FRANCHISE ACT 1998 ARRANGEMENT OF SECTIONS PART I PRELIMINARY Section 1. Short title 2. Commencement 3. Application 4. Interpretation PART II APPOINTMENT OF REGISTRAR OF FRANCHISES, REGISTRATION, ETC. 5. Appointment of Registrar, Deputy Registrar, etc. 6. Registration of franchisor 6A. Registration of franchisee of foreign franchisor 6B. Registration of franchisee 7. Application for registration 8. Approval or refusal of application for registration 9. Effective date of registration of franchise 10. Period of effectiveness 10A. Renewal of registration of franchise 10B. Display of registration of franchise 11. Amendments to supporting documents for registration of franchise 4 Laws of Malaysia ACT 590 Section 12. Notice of suspension, termination, etc., of registration 13. Cancellation from registrar 14. Registration of franchise broker or franchise consultant 14A. Renewal of registration of franchise broker or franchise consultant 14B. Display of registration of franchise broker or franchise consultant 15. Compulsory practice 16. Annual report 17. Appeal against Registrar’s decision PART III FRANCHISE AGREEMENT 18. Requirements of franchise agreement 19. Payment of franchise fee, etc. 20. Prohibition against discrimination 21. Payment of franchise fees or royalty 22. Promotion Fund 23. Promotion fees, etc. 24. Registration of trade mark 25. Franchise term 26. Confidential information 27. Prohibition against similar business 28. Waivers void PART IV CONDUCT OF PARTIES AND TERMINATION OF FRANCHISE AGREEMENT 29. Conduct of parties 30. Obligations of franchisor and franchisee 31. Termination of franchise agreement 32. Non-renewal of franchise agreement 33. Earlier termination of franchise term Franchise Section 34. Extension of franchise term PART V FRANCHISE ADVISORY BOARD 35. Franchise Advisory Board 36. Functions of Franchise Advisory Board PART VI OFFENCES AND PENALTIES 37. Offence for fraud, deceit, etc. 37A. Offence of holding out as a franchise 38. Obstruction of officers 39. General penalty 40. Offence by body corporate 41. Compounding of offences PART VII ENFORCEMENT 42. Authorized officer 43. Power to investigate 44. Search by warrant 44A. Search warrant valid notwithstanding defects 45. Search and seizure without warrant 46. Search of female person 47. Access to computerized data 48. List of things seized 48A. Forfeiture of seized book, etc. 48B. Release of seized book, etc. 48C. No cost or damages arising from seizure to be recoverable 48D. Reward for information 49. Power to require attendance of person acquainted with case 5 6 Laws of Malaysia Section 50. Examination of person acquainted with case 51. Additional powers 52. Prosecution PART VIII MISCELLANEOUS 53. Sale of franchise to non-citizen subject to Registrar’s approval 54. Sale of franchise by foreigner in Malaysia 55. (Deleted) 56. Public inspection of disclosure documents 57. (Deleted) 58. Power to exempt 59. Protection of officers 60. Regulations 61. Savings and transitional ACT 590 7 LAWS OF MALAYSIA Act 590 FRANCHISE ACT 1998 An Act to provide for the registration of, and to regulate, franchises, and for incidental matters. [8 October 1999, P.U. (B) 389/1999] BE IT ENACTED by the Seri Paduka Baginda Yang di-Pertuan Agong with the advice and consent of the Dewan Negara and Dewan Rakyat in Parliament assembled, and by the authority of the same, as follows: PART I PRELIMINARY Short title 1. This Act may be cited as the Franchise Act 1998. Commencement 2. This Act comes into operation on a date to be appointed by the Minister by notification in the Gazette. Application 3. (1) This Act applies throughout Malaysia to the sale and operation of any franchise in Malaysia. 8 Laws of Malaysia ACT 590 (2) The sale and operation of a franchise is deemed to be in Malaysia where— (a) (b) an offer to sell or buy a franchise— (i) is made in Malaysia and accepted within or outside Malaysia; or (ii) is made outside Malaysia and accepted within or outside Malaysia; and the franchised business is operated or will be operating in Malaysia. (3) Nothing in this Act shall affect the provisions of any other written laws, but if there is any conflict between the provisions of this Act and the provisions of the other written laws, the provisions of this Act shall prevail. Interpretation 4. In this Act, unless the context otherwise requires— “advertisement” means any publication, circular, notice, or any oral or written communication, whether broadcasted by electronic or any other publishing media, or any form of electronic communications to the public for the purpose of offering the sale of a franchise or promoting the sale of a franchise; “authorized officer” means an officer authorized in writing by the Minister under section 42 to exercise the powers of enforcement under this Act; “disclosure documents” means such disclosure documents as may be prescribed by the Minister; “franchise” means a contract or an agreement, either expressed or implied, whether oral or written, between two or more persons by which— Franchise 9 (a) the franchisor grants to the franchisee the right to operate a business according to the franchise system as determined by the franchisor during a term to be determined by the franchisor; (b) the franchisor grants to the franchisee the right to use a mark, or a trade secret, or any confidential information or intellectual property, owned by the franchisor or relating to the franchisor, and includes a situation where the franchisor, who is the registered user of, or is licensed by another person to use, any intellectual property, grants such right that he possesses to permit the franchisee to use the intellectual property; (c) the franchisor possesses the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the franchise system; and (d) (Deleted by Act A1442). (e) in return for the grant of rights, the franchisee may be required to pay a fee or other form of consideration. (f) (Deleted by Act A1442). “franchise agreement” means a contract or an agreement made between a franchisor and a franchisee in respect of a franchise in return for any form of consideration but does not include any contract or agreement made for the purpose of direct selling as provided by the Direct Sales Act 1993 [Act 500]; “franchise broker” means a person doing business as an agent or representative of a franchisor to sell a franchise to any person for a certain consideration but does not include any director, officer or employee of the franchisor or franchisee; “franchise consultant” means a person who provides advice and consultancy services to another person on the registration of a franchise business and compliance of the related laws; 10 Laws of Malaysia ACT 590 “franchisee” means a person to whom a franchise is granted and includes, unless stated otherwise in this Act— (a) a master franchisee with regard to his relationship with a franchisor; and (b) a subfranchisee with regard to his relationship with a master franchisee; “franchisor” means a person who grants a franchise to a franchisee and includes a master franchisee with regard to his relationship with a subfranchisee, unless stated otherwise in this Act; “mark” includes a trade mark, service mark, symbol, design, brand, heading, label, ticket, name, signature, word and letter or any combination of them; “master franchisee” means a person who has been granted rights by a franchisor to subfranchise to another person, at his own expense, the franchise of the franchisor; “Minister” means the Minister for the time being charged with the responsibility for matters relating to franchises; “person” includes a natural person, corporation, partnership, association, firm, joint venture or trust; “prescribed” means prescribed by regulations made under this Act; “Registrar”, “Deputy Registrar” and “Assistant Registrar” mean respectively the Registrar of Franchises, a Deputy Registrar of Franchises and an Assistant Registrar of Franchises appointed under section 5; “regulations” means regulations made under this Act; “subfranchise” means a franchise granted by a master franchisee to a subfranchisee for business purposes under this Act; “subfranchisee” means a subfranchise holder; Franchise 11 “this Act” includes any regulations made under this Act. PART II APPOINTMENT OF REGISTRAR OF FRANCHISES, REGISTRATION, ETC. Appointment of Registrar, Deputy Registrar, etc. 5. (1) The Minister may appoint a public officer as a Registrar of Franchises and such number of Deputy Registrars of Franchises, Assistant Registrars of Franchises and other officers as may be necessary for the purposes of this Act. (2) The Registrar shall, subject to the general direction and control of the Minister, perform the duties imposed and exercise the powers conferred on him under this Act. (3) The Deputy Registrar, Assistant Registrars and other officers appointed under subsection (1) shall be under the direction and control of the Registrar. (4) The Deputy Registrar may perform all the duties and exercise all the powers conferred upon the Registrar under this Act. (5) The Registrar or Deputy Registrar may perform all the duties imposed and exercise all the powers conferred upon an Assistant Registrar under this Act. (6) All officers appointed under this section shall be deemed to be public servants within the meaning of the Penal Code [Act 574]. *Registration of franchisor 6. (1) A franchisor or a foreign person who has obtained an approval to sell a franchise in Malaysia or to any Malaysian citizen under section 54 shall register his franchise with the Registrar before *NOTE—See section 27 Franchise Act (Amendment) 2020 [Act A1617]. 12 Laws of Malaysia ACT 590 he can operate a franchise business or make an offer to sell the franchise to any person. (2) Any franchisor or foreign person who fails to comply with this section, unless exempted by the Minister under section 58, commits an offence and shall, on conviction, be liable— (a) if such person is a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit, and for a second or subsequent offence, to a fine not exceeding five hundred thousand ringgit; or (b) if such person is not a body corporate, to a fine not exceeding one hundred thousand ringgit or to imprisonment for a term not exceeding one year or to both, and for a second or subsequent offence, to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding three years or to both. Registration of franchisee of foreign franchisor 6A. (1) Before commencing the franchise business, a franchisee who has been granted a franchise from a foreign franchisor shall apply to register the franchise with the Registrar by submitting the application in such form as may be determined by the Registrar together with the prescribed fee and such application shall be subject to the Registrar’s approval. (2) The Registrar may impose any conditions for the approval of registration of franchise referred to in subsection (1). (2A) Upon ap