Malaysia is the ultimate franchise “frontier”

As John O’Brien, chairman of Asian Pacific Franchise Confederation, recently declared “the franchise industry in Malaysia is exciting”: it has been growing at a rapid pace of 12 to 15% in the past five years following the Government’s efforts in emphasizing the need to go into franchising. The franchise industry contributed about 6 billion euro to the nation’s Gross Domestic Product, which is about 2.5%.

There are 670 franchise brands in Malaysia, out of which 70% are local. Sectors that top the list are food and beverage, retailing, education and beauty and health, among other businesses.

September 20th franchise fair in Kuala Lumpur was a success

The Franchise International Malaysia fair, which took place on September 20th participation of 110 local and overseas franchise companies, was a great success. It is the largest annual franchising exhibition and conference in Southeast Asia and it is the tangible proof of the importance of the Malaysian franchise market in the international scene.

Local franchise brands have a big potential in exploring the international market considering that there are now 49 of them in 51 countries and having established almost 1,500 branches. They are the new potential conquerors of the global franchise market!

The Malaysian Franchise Law

In Malaysia, franchising has been insistently promoted and supported by the government since the early 1990s and this allows us to think about Malaysia as one of the fastest growing franchise markets in Asia today.

The Malaysian Franchise Act, adopted in 1988 and amended in 2012, which applies throughout Malaysia and to the sale and operation of any franchise in Malaysia, was introduced to facilitate and monitor the growth of the franchise industry. For that purpose, under section 6(a) and 54 of the Franchise Act, franchisors, master franchisees and franchisees of foreign franchisors are required to seek an approval from or register with the Registrar of franchise before they can offer to sell or buy franchises in Malaysia.

One requirement that is highly unpopular among franchisors and local master franchisees is that they must be in operation for at least three years before they are permitted to appoint sub-franchisees. The Authorities have taken that it is one of the prescribed requirements under law due to Section 18 of the Disclosure Document, which requires the franchisors or master franchisees to submit audited financial instrument of the past three years. However, under a customary law, foreign franchisors can get the approval from the Registrar as long as they are already in a franchise business before offering the business in Malaysia and if they represent a well-known brand at least in their national market.

From the jurisdictional point of view, it could be useful to bear in mind the mechanism offered by the Commonwealth system, in particular the Singapore’s Reciprocal Enforcement of Commonwealth Judgments Act (chapter 264). The foreign franchisor who wants to sign a franchise fair in Kuala Lumpur was a success master franchise agreement in Malaysia can include in the master franchise contract a clause conferring jurisdiction to the Singaporean courts. The value of this “move” is evident because of the chance to enforce in Malaysia any decision of the competent tribunal, since Malaysia has also embodied in its legislative body the Reciprocal Enforcement of Judgments Act and given that Singaporean courts have a stronger legal tradition than the local courts in Kuala Lumpur, even if the Malaysia commercial law is shaped on the UK model.

The Government has set a strategic goal of making Malaysia the regional franchise center in 2016

The National Franchise Development Blueprint sets a strategic direction towards making the country a regional franchise center in Southeast Asia by 2016. This is a five-year program, spanning the period from 2012 to 2016, which aims to contribute toward national economic development agenda and creation of a high income society. This program has three main phases: the first aims to strengthen franchise players and develop the network; the second intends to create a “vibrant” and “robust” domestic franchise industry and the last is to transform Malaysia in a franchise hub in the South East Asia.

Malaysia has created several governmental programs to enhance franchising

The Government of Malaysia strongly believes in the potential of the local franchise system but at the same time it recognizes the need of a strong financial support to let the system grow and develop as much as possible.

Realizing this fact, the Government has taken five initiatives to assist and facilitate local business and to remain competitive:

1) The Franchise Financing Scheme allows interested entrepreneurs to take part in a franchise business, obtaining financing through specific financial institutions. The total available fund is 17 million euro to be allocated on a case by case basis.

2) The Franchise Development Aid Fund aims to provide assistance to the individual entrepreneurs or local companies and to promote the export of local products. If the entrepreneur qualifies, his investments can be reimbursed by this fund up to 90% of costs with a maximum of 23,000 euro.

3) The Government introduced also two franchisees’ development program: the Graduated Franchise Program and the Women Franchise Program that are reserved respectively to participants that possess at least a diploma and to women.

4) Moreover the Ministry of Commerce offers to the local franchisee a maximum funding of 11.550 euro to help finance the franchisee’s opening. The Micro-Financing Scheme is open to franchisees from 21 to 65 years old.

The moral of the story is that thanks to the Government’s efforts and to the acumen of the Malaysian entrepreneurs, Malaysia is building a “Franchise Country”, which is now in its infancy stage but has shown already its great potential.

 

Gilles menguy – Avocat à la Cour

gmenguy@gm-avocats.com



French Practice

Franchising

Set up and expand franchises

We help franchisors vet through contracts and customize it to their needs and preference. The document is written with utmost regards to help them make sound business choices. While the contracts are drafted to be user-friendly to both the franchisors and franchisee, rest assured that safeguarding our clients’ interest is still our priority.

Manage relationships and expectations

With our vast experience in franchise, we can help you manage the expectation and relationship between you and the franchisee and provide legal advice for the growth of your business.

Among others, we help our clients record any ownership changes at the franchise level, matter with regards to the renewal of franchise rights, and also construct franchisee advisory councils and advertising cooperatives.

In the event of bankruptcy and receivership situations, we can provide solutions and propose arrangements to protect our client’s interests.

Compliance with franchise law

We prepare Franchise Disclosure Documents to comply with the legal requirements but at the same time, it is concise, efficient and user-friendly. Our expertise includes rules and risk of marketing the franchise opportunity, online and off, directly and through brokers.

Implement brand standards

We put great emphasis on making sure that the client’s brand is not compromised by sub-standard practices. Therefore we help create compliance programs and processes to ensure conformity of the image and consistency of operation among franchises.

Licensing, selective distribution, distribution agreements

Selective distribution and alternate channels 

We counsel our clients on other business initiatives in the area of co-branding, licensing arrangements and alternative distribution channels (licensing, selective distribution).

Litigation and dispute resolution

In the event of disputes, we advise and represent our clients, be it in courts or in alternative dispute resolution such as mediation and arbitration. 

Business and finance transactions

Execution of transactions

We act as special counsel for due diligence for franchisors and private equity investors to acquire brands. (We help brand owners implement their exit strategies.)

Our team is also experienced in a wide range of business and finance transactions, including franchise buybacks, securitization, lending arrangements, management agreements and joint ventures.

Commercial leases and commercial conveyancing

We advise our clients with regards to all legal aspects of their commercial properties. Our team prepares contracts for the transfer, sales and purchases of assets.

Trademarks

Trademark is an integral part of an enterprise, especially in a franchise system. Our team is experienced to handle a multitude of issues related to trademark, from clearance searches, registrations, enforcement of trademark rights to litigation of trademark disputes. 

Distribution and supply chain

We assist manufacturers and suppliers on their relationships with distributors and retailers to organize their supply chains for critical goods and services.

Our services include drafting purchase and sale agreement, payment mechanisms, letters of credit, warranties, commissioned agency and sales representatives’ arrangements and anti-trust issues and cross border sales agreements involving INCOTERMS and the United Nations Convention on the International Sale of Goods.

As part of our Franchising practice, we help franchisors structure approved supplier and distributor programs.

Domain Names, Internet and Technology

We assist in making searches, registering and protecting our clients’ domain names. Our team is also adept in advising clients with regards to protection of privacy and data on the internet, software and hardware licenses and other technological related areas.

Advertising and trade regulations

Our firm can assist with (general advertising standards and special promotional programs such as sweepstakes and gift cards)



Data centers

Toute la jurisprudence de la franchise sur jurisprudencefranchise.com.



Strategic Expertise

Our three offers

Service:

Assist CEO and top management with regard to strategic decisions, key to the company’s future, in particular in crisis situations

Experiences:

  • Negotiation on behalf of management to take control of company and buy out historical shareholders
  • Succession planning in family owned groups with review of business model
  • Crisis management in the event of breakdown of main supplier (50 M)

Service:

Build up to date sourcing strategy and training of staff so as to generate significant gains in purchasing

Experiences:

  • 7% gain on average on purchases of goods and supply agreement strategy
  • Assistance in tenders for investments, factories, logistic platforms and information systems

Service:

Transform and adapt the company to digital world both for internal organization and clients’ relationship

Experiences:

  • Audit of company on its digital strengths and weaknesses with regard to its competitors and implementation of digital strategic plan
  • Definition of the new digital experience destined to clients and developement of digital tools which enhance sales by 25%



International practice

Franchising. We have worked on franchise matters in well over 40 countries. We draft and negotiate master franchise/subfranchise, multiple-unit development, and direct franchise deals.

We also handle many of the ongoing franchise system issues that franchisors encounter, such as renewals, transfers of ownership, refinancing, defaults, termination, and dispute resolution.
We also help foreign franchisors bring their concepts to the french market.

Licensing and commercial deals. We have drafted and negotiated a variety of joint venture, broker, commissioned agency, distribution, license, and other non-franchised business arrangements in other countries. We have handled purchasing arrangements between French clients and foreign suppliers involving INCOTERMS and the United Nations Convention on the International Sale of Goods.

We also advise on foreign exchange rules, letters of credit, commercial agency regulations, and technology transfer issues.

Managing local counsel. When our clients need legal representation in other countries, we call on a trusted network of lawyers and trademark agents.



Franchise Library



Our legal skills

The team is a french and international transactional group.

The team has set up and reorganized hundreds of franchise systems in France.

Internationally the team has developed unique legal capabilities.

First, Gilles is multilingual since he spoke Indonesian from birth, English at three in Georgetown DC, and took up French at six in Hanoi. He has spent 15 years abroad during his youth, attending schools in Jakarta, Georgetown, Hanoi, Boston, Beijing, Singapore, Bangkok, Vientiane and Port-Vila in Vanuatu.

Since an early age he has been exposed to an international culture and developed unique people skills and problem solving attitude. Making a personal statement of helping franchisors export to and from France their franchise systems, he has put to good use his lateral thinking aptitudes which in many cases has generated simple and creative solutions to apparently deadlocked situations.

First of its kind in the world, the firm has set up a one-stop start-up franchise system program. To participate in the program, the start-up franchise system must first qualify.

The main criteria to qualify is the business idea’s potential to dominate its market. If it qualifies the group deploys its lawyers, consultants, partner investment funds, analysts, mentors and business angels to help the system come to life.

The firm has also structured a corporate law and private equity practice. We have helped our clients in various types of transactions, be it mergers and acquisitions, vetting shareholders’ agreements, negotiating buyout, cross borders investments, joint ventures and advising on formation and structuring or restructuring of corporate entities.

As General Counsel to its clients, the firm assists franchisors in their day to day operations by helping the whole management team, from CEO to Franchise Developer and Franchise Director. Daily work consists in making sure the franchise newcomers have properly executed the contracts, dealing with difficult situations within the network, assisting in the sale or acquisition of commercial premises, performing company secretarial work.

As a seasoned French litigation outfit, we have argued hundreds of cases across France in distribution law and general commercial litigation.

This expertise is derived from the fact that until 2005, Gilles has acted as an advocate of franchisees against some of the most powerful franchise systems in France. During these years he has developed a very wide expertise and in-depth knowledge of court tactics.

Since 2006, he has reoriented his practice to defend franchisors exclusively.

Knowing intimately court tactics of both sides is an asset for clients.

Gilles has invented the golden rule, a one page method of analysis of cases which ensures that no rocks stay unturned.

The team has litigated before the following courts:

Commercial courts : Cusset, Montluçon, Cannes, Troyes, Narbonne, Aix-en-Provence, Marseille, Caen, Lisieux, Angoulême, La Rochelle, Saintes, Dijon, Guéret, Besançon, Evreux, Chartres, Brest, Nîmes, Toulouse, Bordeaux, Montpellier, Rennes, Châteauroux, Tours, Grenoble, Blois, Saint-Etienne, Nantes, Orléans, Angers, Briey, Vannes, Metz, Nevers, Douai, Dunkerque, Lille, Roubaix-Tourcoing, Beauvais, Arras, Clermont-Ferrand, Bayonne, Pau, Tarbes, Saverne, Strasbourg, Mulhouse, Mans, Annecy, Thonon-les-Bains, Paris, Meaux, Melun, Versailles, Niort, Amiens, Castres, Montauban, Toulon, Avignon, Poitiers, Evry, Nanterre, Bobigny, Créteil, Pontoise

Appellate courts : Aix-en-Provence, Amiens, Angers, Besançon, Bordeaux, Bourges, Caen, Chambéry, Douai, Grenoble, Lyon, Montpellier, Nîmes, Paris, Pau, Poitiers, Rennes, Riom, Rouen, Toulouse, Versailles.



Our team

team

Paris Office

Grace AGBANRIN
Office Manager
Paris, France


Christine CHAN
International contracts
Head of Asean Desk
Paris, France
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Sarah GALAU
International Contracts – IP/IT
Lawyer
Paris, France


Aurelie HALIMI
Legal Executive
Head of Mexican Desk
Mexico City, Mexico


David MARTEL
Litigation and arbritation, contracts
international contracts,
patrimonial law
Of-Counsel
Head of Indian Ocean Desk
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Gilles MENGUY
Franchising
Managing Partner
Paris, France
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Alena SHCHELOKOVA
Legal Executive
Paris, France


Laëtitia VOUTIER
Paralegal
Paris, France


Affiliates and Of-counsel

Maris DESMORTREUX
Affiliate Partner
Lyon, France
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MD Omar Bin HARUN KHAN
Affiliate Partner
Dhaka, Bangladesh

Severine GIANÈSE-PITTMAN
Of-Counsel
Miami, Florida

Tai Foong Lam
Affiliate Partner
Kuala Lumpur, Malaysia




Our founder




Gilles Menguy

Founder of the Firm

He is qualified as Avocat au Barreau de Paris (1998) and Solicitor of England & Wales (2006) and attended Paris Sorbonne and Harvard Law School.

Since 1995 Gilles has developed a complete expertise in franchising, covering contract both French and international, corporate and M&A, litigation, and the role of general counsel to franchisors. As such he has progressively grown into a seasoned deal maker and troubleshooter.

Advocate of the franchise system as the best tool for economic, human and country development, he is a regular speaker  at French or foreign events and writes articles.

Gilles works with consultants for franchise build up operations, from across the board.

From 2007 to 2012, Gilles has organized 57 seminars, on all topics of franchising with hundreds of business people, franchisors and consultants.

In 2013, Gilles advised during a 5 months marathon stretch of time a french F&B Group in the negotiation and signing of the meg franchise deal sealing the return of Burger King in France, which has had a transformational impact on the F&B landscape in France ever since.

Since 2015, on the invitation of the US Government, Gilles assists the tunisian Government, in particular its competition authorities, which is pursuing a process of modernisation of its legal environment with regard to franchising and trade in general, the goal of which is to enhance international trade. This process is due to be extended throughout North Africa. On December 2, 2015, he shall be the keynote speaker at the franchise fair in Tunis.

Gilles gives seminars on franchising to board rooms of listed companies. He takes part in franchise network annual meetings.

He is co-author of the French Chapter of the International Franchise Sales Laws book published by the Forum on Franchising of the American Bar Association, which is the definitive book on the topic, the co-editors being Andrew P. Loewinger and Michael K. Lendsey.

Three other books have been published of which Gilles has been an author namely:

He is recognized by peers and has been selected every year from 2010 to 2020 in the International Who’s Who of Franchise Lawyers, refered to as “brilliant” and “one of the best lawyers in the country”, renowned for his work with both established brands and start-ups and clients value his “spot-on” counsel.

he has in particular been appointed as one of the 30 most Highly Regarded Individuals in the world in Franchising law.

From 2011 to 2020, he has been selected in distribution and franchise law by the legal magazine Revue Décideurs.

In 2020, Gilles has launched several IT Tools and internet services, among which jurisprudence franchise, a webplateform dedicated to franchise law and which provides a call to action to clients in litigation situations by offering a no win no fee strategy.

In parallel in 2020, in the context of Covid-19, Gilles and his team put to use their in depth knowledge of chinese international contracts to help secure the acquisition of  51 million masks, gloves and tests for the French Government, in assisting a strategical french medical listed company which acted as go-between with chinese industrial companies.

Gilles has also entered the board of UniPharma Group, an international organization dedicated to assisting war zone countries in providing medical supplies in the form of revolutionary anti microbian products.

He teaches franchise and European distribution law as adjunct professor for Masters students at the Paris Nanterre University.

E-mail: gmenguy@gm-avocats.com
Phone: +33(0)1 88 33 47 37

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Our difference

We’re one of the few truly independent, niche franchise law practices in the world packed into a small, dynamic firm.

One practice group. We are a small firm by size but since we only have one practice group, in reality we are one of the biggest players around the block, even in comparison to the full service law firms. Full service law firms may impress by the numbers but in reality its franchise team will only be made up of a partner and one or two associates. Because franchising is not usually the most intensely billable area for such law firms, franchising will not be considered as central to the firm’s strategy.

What happens next?

If a court case comes about, the mega firm will put one or two “fighters” on the field whereas we would be able to put up more experts, outnumbering the opponent’s.

Our team is well equipped to handle difficult legal issues thanks to decades of collective experience and we have probably seen it all before, so we just have to ask our neighbour next door in the office what he thinks of the situation. Whereas the magic circle partner in larger law firms will in reality have no one to talk to, except his very bright ivy league junior lawyer who will tell him what he finds in the manual or the neighbouring tax partner who will ask him what type of tax franchise he is talking about !

We are ALL franchising, this is all we do all day.

One industry to care for. Franchising is more than a particular area of the law. For millions of individuals, it is their profession: franchise system founder, franchise national and regional developer, international developer, franchise director, franchisees, investors, outlet manager, rank and file employee. Professionals with different expertise take part in the development of franchise networks such as architects, IT companies, marketing agencies, commercial real estate companies, suppliers, consultants, investment funds.

Globally, there are dozens of franchise associations. Every weekend, there is a franchise fair taking place somewhere. Dozens of magazines are specialised in franchising. Government agencies and banks have developed departments dedicated to the industry. There are hundreds of sectors which have adopted the franchise model : Accounting & Financial, Advertising & Marketing, ATM, Automotive, Business Opportunities, Business Services, Children’s Franchises, Cleaning Franchises, Coffee Franchises, Computer & Internet Franchises, Consultant & Business Broker Franchises, Courier Franchises, DVD & Video Franchises, Employment & Staffing Franchises, Entertainment Franchises, Fitness Franchises, Food Franchises, Health & Beauty Franchises, Healthcare & Senior Care Franchises, Home Services Franchises, Home-based Franchises, Industrial Franchises, Mailing & Shipping Franchises, Moving & Storage Franchises, Pet Franchises, Photography Franchises, Printer, Copying & Sign Franchises, Real Estate Franchises, Restaurant Franchises, Retail Franchises, Security Franchises, Sports Franchises, Tax Franchises, Training Franchises, Travel Franchises, Vending Franchise Opportunities.

Flexible billing. Our goal is that you are as comfortable with the fairness of our bills as you are with the quality of the legal services that we provide. We are willing to quote fixed project fees when we have an adequate basis of experience with similar projects and sufficient information about the specific work needed by the client. Of course, it is difficult to quote project fees for certain types of projects, such as contract negotiations and litigation, because the time and effort required depend so much on the other party and its counsel. When project fees are not feasible or not preferred by the client, we generally bill at an hourly rate (though we are open to discuss other arrangements). We can also provide an estimate should the need arises.