Franchising refers a business model where the "franchisors" authorize the proven methods, strategies and trademarks of their businesses to "franchisees" for a fee and a percentage of gross monthly or annual sales revenue.

The franchisors provide various tangibles and intangibles such as national or international advertising, training, and other support services for the franchisees in return as per the franchising agreement.

Franchising can be seen as a faster, cheaper form of expansion than adding company-owned stores, because it costs the parent company much less when new stores are owned and operated by a third party. However the parent company will only earn a percentage of the earnings from each new store. The franchisee also pays the costs of actually starting and operating the store, including legal fees, occupancy or construction costs, inventory costs, and labour.

Agreements may last 5 to 20 years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees.

Franchise is also a method of marketing and distributing of product or services based on a two-party relationship; that is the franchisor (the owner and granter of right) and the franchisee (recipient of right) relationship. The right granted is for the purpose of running the business by using the trademark or trade name based on a specific system, at specified location or area within a specified period of time.

• Franchisee incurs lower initial capital than independently starting a company

• Able to utilise franchisor’s proven successful strategies and trademarks

• Franchisor can expand rapidly without increasing its labour force and operating costs, using much less capital

• Parent company earns a higher margin for the franchised stores than company-owned stores because of minimal operating expenses in maintaining franchised stores.

• Leveraging on a recognised brand name and business image

• Assured of consistent quality

• Attaining higher productivity/better motivated staff

• Reducing risks of failure leveraging on a proven product with good track record

• Franchise soffer important pre-opening support:
• • site selection
  • design and construction

• financing (in some cases

• training

• grand-opening program

Generally there are 3 types of popular franchise system:

• Product distribution franchise;

• Business format franchise; and

• Management franchise.

A product distribution franchise model is similar to supplier-dealer relationship, however, the franchisee is required to observe a few guidelines e.g. agreeing to sell only the franchisor’s brand exclusively.

For example, an outlet may agree to sell only certain products in its store at the exclusion of some other products. Typically, the franchisee merely sells the franchisor’s products. However, this type of franchise will also include some form of integration of the business activities. The franchisee is allowed to be much more independent than if he or she was running a business format franchise.

Some well known product distribution franchises are Coca-Cola, the Ford Motor Company, Exxon and Osim.

Product distribution franchises deal mainly with large products such as automobiles and auto repair parts, vending machines, computers and some inventory for convenience stores.

In a business format franchise, the business integration is more complete. The franchisee distributes the franchisor’s products and services under the franchisor’s trade mark, as well as implements the franchisor’s format and procedure of conducting the business.

The arrangement is formalized through a legally binding contract. This comprises the franchisor’s name, goodwill, product and services, procedures, manuals and standards, marketing operating systems and support facilities.

Business format franchising is the most popular type of franchise system and the one generally referred to when talking franchising. Famous examples of Business Format Franchise are McDonalds, KFC, Famous Amos, Starbucks Coffee and Dunkin’ Donuts.

It is a form of service agreement whereby the franchisee provides the management expertise, format and/or procedure for conducting the business. Some examples of Management Franchise are Hilton, American Idol and UPS Store.

Demands of franchisor, e.g. income projections, deadline to open more franchise outlets

Regulated by contract which usually covers:

• Initial fee
• Royalty fee/Management fee
• Capital required from franchisee
• Territory/Area of operation
• Duration of license and renewal
• IPRs
• Termination

Be Careful!

• The franchisee is not completely independent. It must comply with the terms and conditions of the franchise agreement.

• In addition to the initial franchise fee, franchisee must pay on-going royalties and advertising fees. This could result in a substantial up-front outlay in terms of advance payments.

• Franchisee must be able to balance restrictions and support provided by the franchisor with their own ability to manage the business.

• A damaged image or franchise system can result if other franchisees perform poorly or the franchisor has financial problems. This could cause disruption to on-going operational support in terms of supply of goods and services.

• The duration of a franchise is usually limited and the franchisee may have little or no say concerning termination.

Common Mistakes of Prospective Franchisees

• Not reading, understanding and/or asking questions about the franchisee agreement and other legal documents.

• Not understanding the responsibilities of a franchisee and the rights and obligations of a franchisor.

• Not seeking sound legal and financial advice.

• Not verifying oral representations of franchisor.

• Not analyzing the local market in advance.

• Not analyzing the competition.

• Not making thorough due diligence of the franchisor.

• Not choosing the right location.

Exportation is defined as to take or cause goods or commodity to be taken out of Malaysia by land, sea, or air, to place any goods in a vessel, conveyance or aircraft for the purpose of trade. Exporting is a great way to expand your business and if done properly, can significantly increase your profitability.

Why grow your business through exporting?

Getting the right balance between international and domestic trade can protect your business if there is a downturn in one of your markets. Exporting will also expose you to new ideas, marketing techniques and ways of competing that you wouldn't generally experience at a local or national level. The challenges and victories you experience through exporting to overseas markets will also help develop your skills and ability to compete more robustly in your domestic market.

Below are our 11 tips for exporting success:

Menara MATRADE,

Jalan Khidmat Usaha,

Off Jalan Duta,

50480 Kuala Lumpur,

MALAYSIA

Before you launch into importing the first thing you need to do is analyse its feasibility and start planning. This includes:

Import licence is a permit that allows an importer to bring in a specified quantity of certain goods during a specified period. Import licences are employed as means of restricting outflow of foreign currency to improve a country's balance of payments position and to protect the domestic industry from foreign competition.

At present as per the Malaysian import trade policy, most imports can be admitted under an open general licensing regime. However, specific import licences are required for certain controlled items which are intended for import into the country. These items are explosives and firearms, motor vehicles, plants, certain pharmaceuticals, tin ore, soil samples and various foodstuffs. A restrictive import licensing regime is also charged on heavy construction equipment, electrical household appliances, and iron and steel products. Applications for import licences should indicate the identities of the purchaser and supplier and a general description of the items and market value.

Malaysia has based its customs tariff regime on the Harmonized Commodity Description and Coding System of goods clarification. Tariff duties are from 2% to 60%, with an average tariff level of 15%.Higher duties are imposed on so called "luxury" items like liquor and cigarettes and items that are deemed to be in direct competition with locally produced goods.

Any imported beef and poultry products must be certified "halal". Items prohibited from being imported include corrosive chemicals and any "indecent or obscene" materials. Items from the former Yugoslavia and Israel are prohibited.

Direct selling companies wanting to operate in Malaysia must comply with certain regulations set by the Domestic Trade and Consumer Affairs Ministry before a license can be granted. The company must have at least 70% local ownership and must be locally incorporated, 80% of the products must consist of local content and any proposed price increases must be approved by the ministry.

Operating licenses are granted for one-, two- and three-year terms, and existing regulations stipulate that paid-up capital, quality assurance standards and marketing plans must be submitted before any such licenses are granted.

It's crucial that you determine the viability of importing before you get started. Will the price you ask for your goods cover all of the costs involved with importing?

There are many additional costs involved in importing. These include, but are not limited to, the exporter's selling price, clearing charges, transport costs, customs duty, port charges, insurance, fumigation charges and bank charges.

Learn Exporter's Language

You should understand the fees, charges and service you are receiving because these terms and conditions may increase the exporter's selling price. Most reputable traders will use Incoterms which are set by the International Chamber of Commerce. Some of the most common trading terms include:

Ex-works: the price quoted for supply of the goods at the seller's warehouse. It doesn't include transport and insurance costs.

FOR FIRST TIME APPLICATION ONLY

Ministry of International Trade and Industry (MITI).

2nd Floor, Block 10

Government Offices Complex

Jalan Duta

50622 Kuala Lumpur

Tel: 03-6203 4817 (Pn Azrilah Abd. Aziz)

03-6203 4814 (En Azlan Shahid)

03-6203 5534 (En Ariffatri )

A brand is the identity of a specific product, service or business. A brand can take several forms, including a name, term, sign, symbol, colour combination or slogan.A brand is a persistent, unique business identity intertwined with associations of personality, quality, origin, liking and more.

Branding is the process of creating and evoking distinctive and lasting perceptions and experiences in the minds of consumers.

The Nike brand name is well-known throughout the world, people can identify the name and logo even if they have never bought any of their products.

However, not only is the company name a brand, but the logo (the ‘tick’ symbol) is also a strong piece of branding in its own right. The majority of people who are aware of the company can also identify it (or its products) from this symbol alone.

• A clear brand identity
• A strong brand culture
• A meaningful brand experience
• Deliver emotional values
• Build valuable relationship

SME Corporation Malaysia has developed the National Mark of Malaysian Brand which was launched in March 2009. It brings with it the attributes of quality, excellence and distinction of products and services by Malaysian companies. Through this effort, the Government hopes to change the perception that local products and brands are of lower quality, reliability as well as low packaging standards than the big brand names.

Participating Malaysian companies will be evaluated using stringent standards, whereby auditing and monitoring measures will be put in place to ensure adherence to the set quality standards. If successful, the products or services will be given the right to carry the Malaysian Brand.

Initiatives under the Programme are as follows:

• The National Mark of Malaysian Brand

• Annual Branding Entrepreneurs Conference (BEC)

• Workshops on Brand Manual for Malaysian Brand Certification

• Branding Innovation Centre at Limkokwing University of Creative Technology (LUCT)

• Branding and Packaging Mobile Gallery.

In order to retain the Mark, auditing and monitoring measures will be done periodically to ensure adherence to the criteria set. Finally, various trade promotion activities will be undertaken to promote brands that have been awarded the National Mark of Malaysian Brand and the recognition of the National Mark of Malaysian Brand itself.

For more info, please visit www.smecorp.gov.my

Malaysia External Trade Development Corporation (MATRADE), was established in March 1993 as a statutory agency under the Ministry of International Trade Industry (MITI).

As Malaysia’s national export promotion agency, MATRADE is responsible for assisting Malaysian companies succeed in the international market. MATRADE’s vision of making Malaysia the premier exporting nation is paired with its mission to develop and promote Malaysia’s exports to the world.

MATRADE serves to promote Malaysia’s external trade with particular emphasis on the export of manufactured and semi-manufactured products and services. In addition, MATRADE formulates and implements export marketing strategies and trade promotion activities to increase Malaysia’s exports, undertake market research, and create a comprehensive database of information for the development and improvement of Malaysia’s trade.

MATRADE also organizes training programs to enhance the international marketing skills of Malaysian exporters, promote and assist in services related to trade, and protect Malaysia’s international trade interest abroad.

One of the initiatives undertaken by MATRADE to develop and promote Malaysian products and services globally is through the creation of Online Directory of Malaysian Brands. This directory showcases the brand names of Malaysian companies who are recipients of the Brand Promotion Grant (BPG).

The Malaysian Brands Directory profiles Malaysia's premier brands to the world - highlighting brands that feature strong positive values, superior innovations and global appeal.

For more info, please visit www.matrade.gov.my

The Buy Malaysia Campaign is a result from the Buy Malaysian Made Campaign which was launched in 1998. The campaign is to encourage consumers to buy Malaysian-made products at reasonable prices and to increase awareness among the public concerning the products and services offered in Malaysia that are at par with the international standard and retailed at reasonable prices.

For more info, please visit www.kpdnkk.gov.my

1 Malaysia Best has created an endorsement brand that shows the Malaysian identity to increase sales and profile of agriculture-based products in domestic and global markets. It is aimed to:

• Create one brand that is effective and as a whole by the Ministry for domestic and global markets.
• Assist to upgrade the agriculture-based products for the international market.
• Enhance the practice and international demand for the agriculture-based products.

For more info, please visit www.fama.gov.my

MyIPO facilitates the dissemination of information and promotional publicity of intellectual property rights (IPR). The activities had contributed not only toward enhancing IPR awareness among Malaysians and enhancing MyIPO’s image, but also fostering valuable networking and partnerships through the various programme organised jointly with key stakeholders throughout the country.

Currently, MyIPO provides the following services:

• Patent
• Trademark
• Industrial Design
• Geographical Indications
• IC Layout Designs
• Copyright

For more info, please visit www.myipo.gov.my

Reference to certification such as Malaysian Standards brings immense benefits to all stakeholders in achieving:

1) Consumer Protection and Public Welfare

2) Industrial Efficiency and Development

The adoption of certification such as Malaysian Standards assures consumers that their safety is taken care of, and ensures that the quality of products and services is worth their money. To industries, it contributes to the reduction of operational costs thereby assuring a rise in profits.

SIRIM-QAS International Sdn Bhd roles is to carry activities of certification, inspection and testing activities. As the leading certification and testing body in Malaysia, SIRIM QAS Sdn. Bhd. has achieved wide recognition nationally and internationally. The company's services conform to international standards and guidelines.

Product Certification Scheme Product Certification is offered to manufacturer who wishes to have its product certified to the requirements of a Malaysian or International Standard. Participation in this scheme is voluntary for most products. However, government regulatory authorities may require mandatory certification for certain products. After successful application, the applicant is given a license to mark the certified product with the "MS" certification mark. However for most regulated products, it is mandatory to affix the SIRIM labels on the products. The presence of the Label attests that the product meets quality requirements of the specified standard or specification. It also provides consumer an assurance of performance, safety and reliability as well as it demonstrates an effective system for production processes.

The Chain-of-Custody Certification is an independent third party verification that the wood products purchased are actually derived from forests which have been certified to have met the requirements of an agree forest management standard. The standard used is the PEFC International Chain-of-Custody standard, Annex 4 of the PEFC Council Technical Document: Chain-of-Custody of Forest Based Products – Requirements. A wood product which has been certified under this scheme is eligible to use the MTCC as well as the PEFC logos which are recognized in the member countries of the PEFC.

This scheme is operated along similar lines to the Product Certification Scheme. However it offers a cost-effective in the absence of a national or international standard for the product. In this case, the product can be certified to association or industry standards as well as acceptable customer specifications. Pre Application fee of RM200 is payable upon application to Product Listing Scheme. Acceptance into this scheme has to be approved by SIRIM QAS International's Certification Panel.

This is a concept of coordination of dimension and space, in which, buildings and components are dimensioned and positioned in terms of basic unit or module, known as ‘1M’ which is equivalent to 100 mm. It is internationally accepted by the International Organization for Standardization (ISO) and many other countries including Malaysia.

This Scheme provides third party certification of products and is based on the ISO certification system no. 7, where a batch of product is sample tested and a certificate of conformity and/or labels are issued to the batch. The certification is based on a Malaysian Standard, an International Standard, an International Standard or a foreign standard of a national standards organisation.

The electrical and electronic is Malaysian largest export revenue earner netting more than half of total export. As good and services flow across borders, business partners and government agencies may require assurance that they measure up to standard, regulations and other requirements.

IECEE CB scheme is one of the multilateral recognition agreement schemes that reassure industrial users and consumer that the product they buy conform to the criteria of an IEC international standards and require no further testing or evaluation. SIRIM QAS International Sdn. Bhd. is now an Issuing and Recognizing National Certification Body (NCB) of the CB Scheme. The Product Certification Section is designated as the NCB and the Electrotechnical Testing Section as the Certification Body Testing Laboratory (CBTL).

The aim of the CB Scheme is to provide manufacturers seeking worldwide third party certification marks, the most economic and cost effective procedures within the best certification time frame.

Currently, certification on several passive fire protection products such as fire resistant door sets and roller shutters is being carried out by SIRIM QAS International Sdn. Bhd. These products are certified as a system which includes components such as the door leaves, frames and ironmongeries. Due to this “system” certification, the products certified must be sold with the exact same components or of equivalent or better grade than those used during testing.

Ensuring that electrical and electronic products/equipment are safe and do not interfere with the normal operation of other equipment is the basis of the emc Scheme. With the Scheme, which can be best demonstrated through independent third-party certification, manufacturers will be able to apply the emc-mark.

Eco-labelling is a means of communicating product’s environment information to consumers and business. This information provides consumers and business the associated environmental benefit and enables purchaser to make decision based on environmental attributes. Under SIRIM QAS International Eco-Labelling Scheme, a product will be independently tested and verified against preset criteria before the organisation is allowed to use SIRIM QAS International’s Eco-Labelling mark on its product, packaging and promotional materials.

 

SIRIM QAS International’s Eco-Labelling mark is an effective marketing tool which will enable a company to position its product as an environmentally-friendly product. This, in turn, will give the product a competitive edge over other similar products in a consumer market that is increasingly becoming more environmentally conscious.