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from burgers to idols

an afternoon on flipping burgers (and franchising of course)

5th december 2007

suaran singh sidhu

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Looking at the burger Why eat burgers? Tracing the history of

franchising

Why it came about and its genesis from licensing arrangements

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What’s holding all that meat in! Structure of a franchise

Fundamentals of starting a franchise

Why have it?

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Ramly Burger The Malaysian perspective

Franchise Act 1998

Is it working?

Who does it apply to?

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home fries What’s in it for you?

Building a practice in the area of franchising

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Sandwich to Burgers Franchising is a form of ‘cloning’

Uniformity Success attracts success Reputation guarantees repeat customers

But…. Akin to giving guns to your enemies Effectiveness of non-compete clauses -

questionable Franchisor dropping out

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ode to ramly burger: Msian Side Opportunities for small or start-up

companies Big Co. leading Small Co. Franchisor brings:

international/regional experience IPRs Tech, trade and tricks of business

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Msian Side (cont’d) Prior to Franchise Act 1998:

Contractual principles

Contract is King - freedom to enter into contracts

Imbalance of power

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Franchise Act Franchise industry - highly regulated Controls terms of contract Controls and introduced scheme of

registration of franchisors, franchisees and franchise brokers

Q: is the wrapping too tight?

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Franchise Act (cont’d) Section 4 - elements of a ‘franchise’ Summary: a licence to operate a ‘success’

business formula or system What can be franchised then? Think big - burgers, TV shows/formats,

gyms, …. Look around you, what else is popping up everywhere with the same ‘taste’

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Franchise Act (cont’d)Msian Franchise Register Distinction between ‘foreign” and

“Malaysian” franchisor Caution: commencement of Franchise Agt

subject to necessary registration Principal >> Master >> Sub.Franchisee (bread, then meat, then mayo….get it right!)

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Franchise Act (cont’d)Any fries or coke with that?

Documents to be submitted Conditions by the Registrar Advertisements on selling/buying franchise Registrar’s decision and appeals The “Fund”

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Kurang Mayo! Some things are a must Franchise Agreement Mandatory terms

Territorial rights Fee: for franchise, promotion Royalty Nature of assitance from Franchisor Duration and terms of renewal Effect of termination/expiration

Failure >> Null and void School of hard knocks approach

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Lapping it up: How long? Mandatory: 5 years Franchisee to renew - Franchisor obliged to

agree Justified: considering the investment of

Franchisee in the business

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Binning it: Termination Termination of Franchise Agreement seen in bad

light Limited circumstances

Breach of confidentiality Non-competitive restrictions False accounting Non-payment IPR infringement Repeated breaches

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Jom, let’s start our Ramly How franchising will benefit you? Let’s start with your area of practice What is the economic climate? How big is franchising in Malaysia? Is it worthwhile?

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Practice in Franchising Majority of franchisors are foreign Establishing some knowledge in franchising

means ability to have a ‘foot in the door’ of these companies

The possibility of spin-off opportunities: Trade mark registration Incorporation of companies Litigation for troublesome franchisees Dealing with foreign counterparts

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How do I get a bite? Target industries that are likely to franchise:

Food and beverage - Carl’s Jr re-entered the market

Concept stores - Gap, Banana Republic TV Formats - American Idol, Deal or No Deal Restaurants/Cafes - Starbucks,Big Apple Donuts Speculated: Home Deco, Car Grooming,

Specialist Spas

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Keep Biting… Once you have targeted these industries,

then start looking for opportunities with similar companies.

Have a web presence - crucial In a matter of time, you are bound to fetch a

franchising brief and you can build your practice

…and when that happens, be prepared!

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Should the CLE be franchised?

Thank you, hope you are sufficiently full