from burgers to idols an afternoon on flipping

from burgers to idols an afternoon on flipping burgers (and franchising of course) 5 th december 2007 suaran singh sidhu 1

Looking at the burger n Why eat burgers? Tracing the history of franchising n Why it came about and its genesis from licensing arrangements 2

What’s holding all that meat in! n Structure of a franchise n Fundamentals of starting a franchise n Why have it? 3

Ramly Burger n The Malaysian perspective n Franchise Act 1998 n Is it working? n Who does it apply to? 4

home fries n What’s in it for you? n Building a practice in the area of franchising 5

Sandwich to Burgers n Franchising is a form of ‘cloning’ n n Uniformity Success attracts success Reputation guarantees repeat customers But…. n n n Akin to giving guns to your enemies Effectiveness of non-compete clauses questionable Franchisor dropping out 6

ode to ramly burger: Msian Side Opportunities for small or start-up companies n Big Co. leading Small Co. n Franchisor brings: n n international/regional experience IPRs Tech, trade and tricks of business 7

Msian Side (cont’d) n Prior to Franchise Act 1998: n Contractual principles n Contract is King - freedom to enter into contracts n Imbalance of power 8

Franchise Act Franchise industry - highly regulated n Controls terms of contract n Controls and introduced scheme of registration of franchisors, franchisees and franchise brokers n Q: is the wrapping too tight? n 9

Franchise Act (cont’d) Section 4 - elements of a ‘franchise’ n Summary: a licence to operate a ‘success’ business formula or system n What can be franchised then? n Think big - burgers, TV shows/formats, gyms, …. Look around you, what else is popping up everywhere with the same ‘taste’ n 10

Franchise Act (cont’d) Msian Franchise Register Distinction between ‘foreign” and “Malaysian” franchisor n Caution: commencement of Franchise Agt subject to necessary registration n Principal >> Master >> Sub. Franchisee n (bread, then meat, then mayo…. get it right!) n 11

Franchise Act (cont’d) Any fries or coke with that? n n n Documents to be submitted Conditions by the Registrar Advertisements on selling/buying franchise Registrar’s decision and appeals The “Fund” 12

Kurang Mayo! Some things are a must n n Franchise Agreement Mandatory terms n n n n 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 13

Lapping it up: How long? Mandatory: 5 years n Franchisee to renew - Franchisor obliged to agree n Justified: considering the investment of Franchisee in the business n 14

Binning it: Termination n n Termination of Franchise Agreement seen in bad light Limited circumstances n n n Breach of confidentiality Non-competitive restrictions False accounting Non-payment IPR infringement Repeated breaches 15

Jom, let’s start our Ramly How franchising will benefit you? n Let’s start with your area of practice n What is the economic climate? n How big is franchising in Malaysia? n Is it worthwhile? n 16

Practice in Franchising n n n 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: n n Trade mark registration Incorporation of companies Litigation for troublesome franchisees Dealing with foreign counterparts 17

How do I get a bite? n Target industries that are likely to franchise: n n n 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 18

Keep Biting… Once you have targeted these industries, then start looking for opportunities with similar companies. n Have a web presence - crucial n In a matter of time, you are bound to fetch a franchising brief and you can build your practice n …and when that happens, be prepared! n 19

Should the CLE be franchised? Thank you, hope you are sufficiently full 20