Discusses opportunities for U.S. franchisers and legal requirements in the market.
Last Published: 8/19/2019

The Malaysian franchise industry continues to achieve healthy growth. The growth rate for 2018 is 9 percent.  The franchise industry contributed RM27 billion/ US$6.6 billion to the country’s GDP in 2017 (latest available data). As of February 2019, 877 current domestic and international franchise brands are registered with the Malaysian authority.

Approximately 40 percent franchise concepts in Malaysia are foreign owned. The United States has the largest share, predominently in food and beverage concepts. Malaysian entrepreneurs and investors are increasingly savvy on franchise concepts. Niche concepts with unique product value propositions would be of interest to the Malaysian franchisee.

The 2018 Malaysian franchise market, by sector, can be divided into:

  • Food and Beverage: 42 percent
  • Clothing and Accessories: 10 percent
  • Education and childcare: 11 percent
  • Services: 11 percent
  • Beauty and Healthcare concepts: 8 percent
  • ICT: 3 percent
  • Convenience Stores: 2 percent
  • Others: 12 percent

Perbadanan Nasional Berhad (PNS) is a corporatized government entity tasked as the lead agency in developing the Franchise Development Program. It is under the purview of the Ministry of Domestic Trade and Consumer Affairs. Even though PNS mainly focuses on encouraging home-grown franchise concepts, they are open to exploring collaboration with foreign franchises. The agency’s function is to identify, acquire, launch, facilitate and encourage both local and international franchise brands. PNS is leaning towards lower cost service sectors as the next prime mover for entrepreneurs.

In Malaysia, franchising is governed by the Malaysian Franchise Act 1998. This Act applies to the sale of franchises throughout Malaysia. All franchisers that are selling their franchises in Malaysia are required to register with the Registrar of Franchise (ROF). A franchise amendment bill was introduced in June 2012 and has been in operation since January 1, 2013. The bill works to strengthen administration and enforcement of franchise law, and it amends the Franchise Act to ensure the Act is consistent and up to date with current franchise development.

As over 60 percent of the Malaysian population is Muslim, U.S. food and beverage related franchise companies that intend to sell to
Muslim consumers should be aware of Halal requirements. Halal is defined as what is permissible under the Islamic Sharia Law. Malaysian standard MS1500:2400 is used in the production, preparation and handling of halal food. This standard prescribes to the practical guidelines for the food industry on the preparation and handling of halal food and serves as a basic requirement for food production and food trade or business in Malaysia. It is used by JAKIM (the Department of Islamic Development Malaysia) as the basis for certification. JAKIM is Malaysia’s halal certifying body, and its practices, standards and testing are often unclear making it difficult for foreign companies to advance the certification process.  As of Feb 2019, JAKIM recognizes three halal certification bodies in the United States: Islamic Food and Nutrition Council of America (IFANCA) with a Halal Research Center based out of Chicago and one based out of Park Ridge, Illinois, and Islamic Services of America (ISA) based out of Cedar Rapids, Iowa. As of the writing of this report, the new Malaysian government is reviewing JAKIM. Their final decision will determine next steps on Malaysia Halal Certification.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.