#23: A Review of Malaysia’s Franchising Policy: Incorporating Readiness Factors for Internationalisation

THE development of Malaysia’s franchise industry is actively endorsed by the government, which is facilitated by many entities like the Franchise Development and Direct Sales Division (BPFJL) and the Malaysian Franchise Association (MFA). The Enhanced Franchise Development Programme (EFDP) was implemented by the Malaysian government in 1998 with the aim of promoting the expansion of Malaysian franchisors into international market. Each agency fulfils a distinct role, coordinates various programmes, and provides incentives to franchise players. One of the observed limitations pertains to the absence of a defined policy for the standardisation of tasks, roles, and programmes among different authorities in evaluating the preparedness of Malaysian franchisors seeking to expand into the international market. Assessing the degree of preparedness is crucial in order to ascertain the franchisor’s ability to sustain and mitigate the risk of failure within the global market. The franchising business plays a significant role in the national economy by generating employment opportunities, fostering infrastructural development, and making substantial contributions to the overall national income. Furthermore, it should be noted that there is currently a lack of index criteria set to assess the level of readiness of these franchisors at the level of relevant agencies and ministries. As a result, the evaluation process depends entirely on trial and error. The establishment of a comprehensive index that includes certain criteria is very important, as it allows government authorities to distinguish ways in which they can facilitate the global growth efforts of Malaysian franchisors. Understanding the factors that contribute to readiness is crucial for the development of a criteria index. This index aims to aid agencies involved in franchise development in assessing and evaluating the level of readiness among Malaysian franchisors who wish to expand into the international market. This project aims to achieve the following objectives: (i) To identify the relevant factors in evaluating the readiness of Malaysian franchisors to expand into the international market; (ii) To develop and validate the criteria index for evaluating the readiness of Malaysian franchisors to expand into the international market; and (iii) To develop decision support tools for the criteria index to evaluate the readiness of Malaysian franchisors to expand to the international market. Overall, this study has identified that there are five important factors related to the assessment of the level of readiness of Malaysian franchisors to expand into the international market, namely: (i) financial resources; (ii) brand orientation; (iii) government support; (iv) value proposition; and (iv) product. A decision support tool, the Franchisor Readiness Index For Franchise Expansion (FRIFIE), has been developed and proposed to be used by agencies or ministries related to franchising in Malaysia to be used in the procedure of identifying Malaysian franchisors who have the potential to expand to the international market.