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Franchise System


While some refer to franchising as an industry, it is more properly described as a method of distributing goods and services. In a franchise setting, the franchisor, grants another party, the franchisee. The right to do business in a prescribed manner during a period of time within a specific area.

Since the mid 1950s, the public has identified the adoption and development of the franchise method of distribution particularly with food, lodging and other service industries. However, the Singer Sewing Machine Company first utilized franchising in the United States during 1860s. General motors in 1898 and Rexall Drugs in 1902. Soon afterwards, many other companies followed suit. Since the end World War II there has been substantial growth, development and adoption of the franchise method of distribution by other industries and companies.

Franchising provides the financially limited investor with a means of rapid entry and broad market penetration of the marketplace without the large-scale capital requirements of an independent start-up. The franchisee is given a complete business format to operate within. This type of business plan to reduce false starts and the chance for costly errors.

In Malaysia, the business concept is relatively new but since its introduction in the 1980s, the concept recorded a commendable growth for foreign franchise apart from creating a network of homegrown franchise businesses. Furthermore, the government itself is supporting the development of franchise business concept through the execution of Franchise Development Program in 1992 under the Entrepreneur Development Ministry.

Prime Minister YAB Dato Seri Dr Mahathir Muhammad through the Ministry aims to make Malaysia as the growth center for franchising in Asia. Thus, besides providing advisory and support services to those involved in franchise businesses, the Ministry also provides funding assistance and lobbying financial institutions to arrange special loan scheme for franchisors and franchisees.


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