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Franchising In Malaysia: Issues And Research Agenda
Franchising is a way of doing and expanding business in the global environment. Franchising has been the leading edge of business since 1950, and it has shown an impressive growth rate in sales and market share. In the global economic downturn, franchising can still survive by decreasing operation costs, increasing unit sales, and taking a leading position in economic recovery (Justis and Judd, 2003). Franchising can be explained as a contractual agreement between two parties (franchisor and franchisee) in which a franchisee pays the franchisor for the right to sell products or services and/or the right to use trademarks and business format in a given location for a specified period (Blair & Lafontaine, 2005).
"Many programs and activities have been implemented, but the numbers of successful franchisors and franchisees especially Bumiputera is still low compared with the ministry’s target"
Dr Khairol Anuar Ishak
Author
The term franchising was used in referring to various business activities, but the contemporary franchise system is referred to as business format franchising. The business format franchising is where the franchisor will grant the right and license to franchisees to sell the product or services, or both, by using the trademark and the business system developed by the franchisor to run the business operations (Khan, 1999). The example of business format franchising in restaurants (KFC, McDonald’s, Pizza Hutt), education (Kumon, Yamaha Music School, Smart Readers), retail (Blockbuster Video, Radio Shack, The Athlete’s Foot), Convenience (7-Eleven, FamilyMart), maintenance/cleaning (Jani-King International, The ServicesMaster Company, Merry Maids), etc. Even though there is little economic difference between traditional and business-format franchising in terms of the type of agreement, type of support provided, and control by the franchisor, business-format franchising has grown much faster than product distribution/traditional franchising (Blair & Lafontaine, 2005)
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The effectiveness for Franchise Development Program is still questionable
The numbers of successful franchisor and franchisee especially bumiputera still low
The potential applicants who participate in FDP to drop out is very high
Even though the franchise system was being tested and proven, it can’t guarantee the success to entrepreneur
The franchise survival rates and profitability are much lower
In general, franchising is an under-researched area that is not well understood, and this sector was found to lack reliable information (Dyl 1991; Frazer 1998; Wlesh 1996). Franchising in Malaysia is still suffering from a lack of reliable information and under-researched areas (Mohd Ali, 1995). In Malaysia, there was very limited information and research focus on the franchising sector compared to developed countries such as the United States of America, Canada, and Australia. In the Malaysia context, many franchisees were found facing problems in managing their business, and in some cases, they had to be terminated due to poor performance.
