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Explore franchising and fuel your entrepreneurial dreams. Our blog is your ultimate guide to the basics, advantages and challenges of franchising.
The Role of the Franchise Act and Standard Operating Procedures (SOP) in Malaysia’s Thriving Franchise Industry
The franchising industry in Malaysia has experienced significant growth and development over the years, becoming a robust sector of the country’s economy. One crucial aspect that has contributed to its success is the Franchise Act of 1998, which plays a pivotal role in safeguarding the interests of both franchisors and franchisees.
This legislation serves as a regulatory framework that establishes clear guidelines for franchise agreements, disclosure requirements, and dispute resolution mechanisms. By providing legal protection and enforcing transparency in business relationships, the Franchise Act has instilled confidence in entrepreneurs looking to invest in franchises and has contributed to the industry’s overall stability. In addition to legal protection, the franchise industry in Malaysia places great importance on the implementation of Standard Operating Procedures (SOP).
These SOP serve as a blueprint for the daily operations of both franchisors and franchisees, ensuring consistency and efficiency in business processes. They cover various aspects, from product quality and customer service to marketing strategies and financial management. By adhering to well-defined SOP, franchisors can maintain brand integrity and quality control across their franchise network.
Simultaneously, franchisees benefit from these SOP by gaining access to proven and effective business practices, reducing the learning curve, and increasing their chances of success. Ultimately, the combination of legal safeguards and robust SOP has played a pivotal role in fostering the growth and sustainability of the franchising industry in Malaysia, making it an attractive option for aspiring entrepreneurs.
Franchisor Makes Money Through Franchisee, Not From Franchisee
Many people assume that in a franchise business, the franchisor gets rich from the franchisee by collecting fees and royalties without contributing much in return. But that is a misunderstanding. In a healthy franchise system, the franchisor earns through the franchisee’s success, not at their expense.
Franchisors usually make money through royalties (a small percentage of the franchisee’s sales), product supply, or shared services. These revenue streams only grow when the franchisee is doing well. Good franchisors provide strong training, marketing support and business guidance. Their goal is to help franchisees succeed because the franchisor’s income depends on the performance of each outlet.
Franchising is less like a simple business transaction and more like a marriage. Both parties must commit to shared responsibilities, clear communication, and long-term goals. If one side stops investing in the relationship, the system breaks down. The franchisor sets the foundation and systems, while the franchisee brings energy and operational excellence to the table. Success only happens when both sides work in sync.
For the public, understanding this relationship helps debunk the idea that franchising is a one-sided arrangement. It’s not about the franchisor taking advantage of franchisees. It’s about aligning the goals of both franchisors and franchisees to create a lasting impact in the communities where they operate.
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