Principles of franchising
Principles of franchising with Gilles Menguy :
An Overview of Franchising in France for American Franchisors by Marion CORNEAU
An Overview of Franchising in France for American Franchisors by Marion CORNEAU (Université d’Orléans and De Montfort University).
La pérennité des contrats de distribution à l’épreuve de l’immixtion du droit social by Virginie SEQUIER
La pérennité des contrats de distribution à l’épreuve de l’immixtion du droit social by Virginie SEQUIER (HEC School of Management)
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
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:
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7% gain on average on purchases of goods and supply agreement strategy
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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:
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Audit of company on its digital strengths and weaknesses with regard to its competitors and implementation of digital strategic plan
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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.