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Here Are the Strategies That Are Helping the Malaysian Franchise Industry to Grow

by Maria Carty-MoleAugust 31, 2016

Malaysia

The Malaysian government is working hard this decade to see the franchise industry reach its full potential by 2020, in line with Vision 2020.

Goals include having the industry make up 9.4% of the country's GDP (it was contributing 2.2% in 2010); seeing a higher share of the nation’s retail business conducted through franchising (maybe even 40%, like in the US); and above all, turning Malaysia into Southeast Asia’s ‘franchise hub’. 

Such strong ambition has resulted in agencies including the Ministry of Domestic Trade, Co-Operatives and Consumerism (MDTCC), the Malaysia External Trade Development Corporation and the Malaysian Franchise Association (MFA) launching a number of catalyst plans, programmes and schemes. "I believe the government has put in place all necessary foundation to develop the nation's franchise industry,” declared Datuk Seri Jamil Salleh, MDTCC Secretary General, at this year’s Franchise International Malaysia expo in May. “Therefore it is crucial for the ministry to spearhead the development of the franchise industry."

Here is a tidy summary of the strategies currently in action, explaining what they do and who they assist.

Sending Franchising Abroad

While there is still great potential for growth in the domestic market, tapping into international markets has recently been recognised by the government as a strong, new way for Malaysian franchisors to do business. In the 11th Malaysia Plan franchising was placed under the title ‘Stepping up internationalisation of services firms’, and the plan resulted in the launch of the Enhanced Franchise Development Program (EFDP). 

The Enhanced Franchise Development Programme
The EFDP is overseen by FRANEX – a committee co-chaired by the MFA and the Director of the MDTCC’s Franchise Development Division – and its objective is to help local franchise brands to expand overseas. It does this by providing training courses and marketing and financial assistance, helping franchisors to prepare agreements and register intellectual property rights abroad. Franchisors and master franchisees, on condition that they meet certain criteria, can apply for reimbursement in September and April of every year.

Another part of the ‘Franchise Malaysia Goes Global’ plan is the matchmaking of exhibitors with potential franchisees on international trade missions. This was seen when Henry Sum Agong, Deputy Minister of MDTCC, led Malaysian franchises to display at the Franchise Expo in Melbourne last weekend. Particular emphasis is being placed on Singapore, Indonesia, China and the Middle East as target regions. 

The government is also doing its best to attract foreign franchisors into Malaysia, a country with vast growth potential. 

Franchising at Home

In 2012 the MDTCC published the five-year National Franchise Development Master Plan, and the ministry has a number of schemes in place to help both franchisors and potential franchisees get started in Malaysia.

Ministry of Domestic Trade, Co-Operatives and Consumerism Malaysia

For financial support, individuals who want to invest in a suitable franchise can turn to the Small Franchise Financing Scheme and borrow up to RM50,000. This is on a ‘micro’ scale in comparison to the Franchise Financing Scheme, which is run in collaboration with CIMB Bank Berhad and Maybank Berhad. This larger scheme offers a loan of up to RM7.5 million to full-time businesses who wish to expand into franchising but lack the capital to do so. The business must be registered under the Companies Commission of Malaysia and owned or controlled by a Malaysian. The MDTCC has given over RM263 million to borrowers in the last ten years.

For education and guidance, the Local Franchise Product Development Programme is available. It shepherds local Bumiputera entrepreneurs from start to finish as they develop their business or product into a franchise empire. Consulting is provided free of charge, with the process usually taking 7-10 months until the first franchisee's outlet is proudly opened.

Occasions that aim to make the franchise industry more public include Franchise Day. Launched by the MDTCC in 2015, it was run as a two-day event on 23 and 24 April this year, featuring 54 franchisors and master franchisees and promoting franchising to the public, civil servants, prospective retirees, and graduates. In a one-day seminar in May the Franchise Exposure, Graduates Franchise Programme (started in 2014) encouraged university graduates to enter into franchising and even offered students placements in franchise companies, as well as loans of up to 70% of franchise investment costs.

Franchise expos in Malaysia and abroad

Other annual events to note are the two expos: the Malaysia International Retail, Franchise and Licensing Fair (displaying more than 250 retail brands from many countries in Asia) and Franchise International Malaysia (the largest yearly franchising exhibition and conference in Southeast Asia). Both of these take place in Kuala Lumpur in the first half of the year.

Strategic Success

These methods are working. Malaysia now has over 800 registered franchise operators in comparison to just 366 in 2008. In June this year MDTCC Minister Datuk Seri Hamzah Zainudin announced that 63 local franchise companies have expanded overseas, opening more than 2,400 outlets in 56 countries.

The Malaysian government understands that the franchise model is a beneficial way for Malaysian entrepreneurs to start SMEs, resulting in employment and growth for the country’s economy.

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