KPDN Franchise Registration for Foreign Franchisors in Malaysia (2026): the Franchise Act, Section 54 + Section 6, MyFEX 2.0 and the register-before-you-sell rule

A Chinese F&B chain, a bubble-tea brand, a beauty or education concept wants to grow in Malaysia by selling franchises — and assumes it can sign a master franchisee, take the fee, and start opening outlets. In Malaysia you cannot. Franchising is one of the few business models here that is regulated by its own statute, and a foreign brand must be registered and approved by the Registrar of Franchise before it offers or sells a single franchise. Do it out of order and the fine reaches RM250,000 for a first offence — and the agreements you have already signed sit on shaky ground. This is how a foreign franchisor enters Malaysia legally, in the right sequence, in 2026.

Why Malaysia regulates franchising at all

Most countries treat a franchise as an ordinary commercial contract. Malaysia does not. Franchising here is governed by the Franchise Act 1998 (Act 590), overhauled by the Franchise (Amendment) Act 2020 which came into force on 28 March 2022 and materially tightened the rules for foreign brands. The Act is administered by the Registrar of Franchise under the Ministry of Domestic Trade and Cost of Living (KPDN), and registration now runs through the online MyFEX 2.0 system.

The policy logic is protection: a franchisee typically pays a large upfront fee and sinks capital into fit-out and stock before earning a cent, relying entirely on the franchisor's disclosures. The Act forces those disclosures to be truthful and registered, sets minimum terms into every franchise agreement, and — crucially for inbound brands — requires the franchisor itself to be vetted and registered before it can sell. For a foreign franchisor, "we'll sort the paperwork after we sign the master franchisee" is precisely the sequence the Act prohibits.

The core rule for a foreign franchisor: register before you sell

The obligation that catches foreign brands sits in two sections that now work together. Under Section 54, a foreign franchisor must obtain the Registrar's approval to sell a franchise in Malaysia to any Malaysian party. Under Section 6, every franchisor — local or foreign — must register the franchise with the Registrar before offering to sell or operate it. Before the 2020 amendment a foreign brand only needed the Section 54 approval; now it must both obtain Section 54 approval and register under Section 6.

The good news is procedural: MyFEX 2.0 consolidates the two into a single application. The system no longer draws a hard line between local and foreign franchisors at the form level — both complete the same online application and submit the same Franchise Disclosure Document and supporting documents. But the substance of the two obligations remains, and the timing is absolute: approval and registration come first, offering and selling come after. You cannot lawfully market the franchise, take a fee, or sign a franchisee until the Registrar has approved you.

The registration chain: who registers, and when

The Act layers several registration duties. For a foreign brand entering Malaysia, more than one of these usually applies at once, and each has its own trigger point.

The practical reading for a China- or foreign-owned brand: you (the franchisor) register under Sections 54 and 6 up front, and your Malaysian master franchisee or local franchisee then carries its own duty to register under Section 6A before it opens for business. Two separate parties, two separate registrations — and the franchisee's Section 6A duty is a common blind spot that comes back to bite an otherwise-compliant structure.

The Franchise Disclosure Document and what you must file

At the centre of the application is the Franchise Disclosure Document (FDD) — a prescribed-form document that tells a prospective franchisee, honestly and in full, what they are buying into. Under Section 7, the franchisor must give the disclosure document to a prospective franchisee at least 10 days before the franchisee signs any agreement or pays any money. MyFEX 2.0 provides a template for the FDD that franchisors are expected to follow strictly.

Alongside the FDD, a registration application typically requires a substantial bundle of supporting documents:

• The Franchise Disclosure Document in the prescribed form;
• A template franchise agreement that already incorporates the mandatory provisions of the Act;
• The franchisor's audited accounts for the latest three financial years;
• The certificate of incorporation of the franchisor;
• An operations manual and a training manual;
• Management accounts for a prototype / pilot outlet — evidence the concept actually operates;
• A brochure describing the franchise business;
• Trademark certificates for the brand, and the results of bankruptcy searches on the relevant parties.

What must be inside the franchise agreement

Malaysia does not leave the franchise contract entirely to the parties. The Act writes minimum terms into every agreement, and two of them decide the shape of your whole Malaysian rollout.

Minimum five-year term (Section 25). A franchise agreement must run for at least five years. You cannot offer a Malaysian franchisee a one- or two-year deal to "test the market"; the statutory floor is five, which forces both sides into a genuine medium-term commitment and shapes your fee and territory model accordingly.

Cooling-off period (Section 18). Every franchise agreement must contain a cooling-off period of at least seven working days, during which the franchisee may terminate the agreement. The franchisor may retain a reasonable amount for expenses already incurred, but the right itself is mandatory. Section 18 also requires other core terms — intellectual property, territorial rights, obligations of the parties, and renewal terms — to be spelled out. A foreign brand's global template usually has to be re-papered to satisfy these Malaysian provisions before it can even be filed.

The penalties — why the sequence is not negotiable

The Franchise Act backs its registration rule with penalties heavy enough to make "sign first, file later" a serious commercial risk, not a paperwork slip.

Operating or selling without registering — Section 6. On conviction, a body corporate faces a fine of up to RM250,000 for a first offence, and up to RM500,000 for a second or subsequent offence. An individual faces up to RM150,000 or one year's imprisonment (or both) for a first offence, rising to RM250,000 or up to three years' imprisonment for repeat offences. These are among the stiffer penalties attached to any Malaysian business-licensing statute.

Franchisee registration defaults — Sections 6A / 6B. Those sections carry no express penalty, so the Act's general penalty under Section 39 applies — for a body corporate, a fine of not less than RM10,000. Small next to the franchisor penalty, but it lands on your Malaysian franchisee and can sour the very relationship you are trying to build.

The step-by-step path for a foreign brand

The order below is what keeps a foreign franchisor on the right side of the Act. Getting the sequence right matters more than moving fast — every step assumes the one before it is done.

What foreign franchisors get wrong

• Signing the master franchisee first. The single most common — and most expensive — mistake. The Act requires registration before the offer and the sale, not after.
• Assuming Section 54 is enough. Since 2022 a foreign franchisor needs Section 54 approval and Section 6 registration. The old one-step view is out of date.
• Filing an unlocalised global agreement. Without the 5-year minimum term, the 7-working-day cooling-off and the prescribed IP/territory clauses, the agreement is not registrable.
• Forgetting the franchisee's Section 6A duty. Even after you are registered, your Malaysian franchisee has its own registration to file before opening.
• No prototype evidence. The Registrar wants to see a concept that actually operates — including prototype-outlet management accounts — not just a deck.

Entering Malaysia as a franchisor, the right way

For a foreign brand, the Franchise Act turns market entry into a sequencing problem: the brand protection, the document localisation, the evidence pack and the MyFEX 2.0 filing all have to be done before the commercial deal you actually came to do. Handled in the right order it is entirely manageable; handled backwards it exposes you to a RM250,000 penalty and agreements resting on an unlawful sale.

ONEKEY BIZ helps China and foreign franchisors enter Malaysia in compliance: securing your Malaysian trademark, localising the FDD and franchise agreement to the Act's mandatory terms, assembling the audited accounts and prototype evidence the Registrar expects, filing the combined Section 54 / Section 6 application on MyFEX 2.0, and guiding your master franchisee through its own Section 6A registration — so that when you finally sign, everything behind the signature is already lawful.

Franchising usually sits alongside the rest of your Malaysian setup — a local entity, a business licence, trademark protection and tax registration. See our guides on 100% foreign ownership and the WRT licence, the DBKL business licence in Kuala Lumpur, and registering a Sdn Bhd as a foreigner. When you are ready, talk to ONEKEY about your franchise entry or explore our legal & licensing advisory. WhatsApp us at +60 12-321 1349.

This article is general information only, not legal, tax or immigration advice. Policies, thresholds and official fees are set by the relevant Malaysian authorities and may change. Talk to our consultants about your specific situation.