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Sub Franchise Agreement Template for Malaysia

A comprehensive legal agreement governed by Malaysian law, particularly the Franchise Act 1998, that establishes the relationship between a sub-franchisor and sub-franchisee. This document outlines the rights to operate a franchised business within a specified territory, including the use of intellectual property, operational standards, and financial obligations. It ensures compliance with Malaysian franchise regulations while protecting the interests of all parties in the franchise hierarchy, including the master franchisor's rights and standards.

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What is a Sub Franchise Agreement?

The Sub Franchise Agreement is a crucial document used in Malaysian franchise businesses where a master franchise holder (sub-franchisor) grants rights to another party (sub-franchisee) to operate the franchise business. This arrangement must comply with the Malaysian Franchise Act 1998 and requires registration with the Franchise Registry. The document is essential when expanding franchise operations through a tiered structure, typically used by international franchises entering the Malaysian market or large domestic franchises scaling their operations. It contains detailed provisions for operational standards, territory rights, intellectual property usage, financial obligations, and compliance requirements specific to the Malaysian business environment.

What sections should be included in a Sub Franchise Agreement?

1. Parties: Identification of the sub-franchisor and sub-franchisee, including full legal names and registration details

2. Background: Context of the agreement, including reference to the master franchise agreement and authority to grant sub-franchises

3. Definitions: Key terms used throughout the agreement, including specific franchise-related terminology

4. Grant of Sub-Franchise: Specific rights granted to the sub-franchisee, including territorial limits and scope of operations

5. Term and Renewal: Duration of the agreement and conditions for renewal

6. Fees and Payments: Initial fees, ongoing royalties, and other financial obligations

7. Intellectual Property Rights: Usage rights and restrictions regarding trademarks, trade secrets, and other IP

8. Training and Support: Sub-franchisor's obligations regarding initial and ongoing training and support

9. Operating Standards: Required operational procedures, quality standards, and compliance requirements

10. Marketing and Advertising: Marketing obligations, advertising fees, and promotional requirements

11. Reporting and Audits: Financial reporting requirements and audit rights

12. Confidentiality: Protection of confidential information and trade secrets

13. Transfer and Assignment: Conditions for transfer of the sub-franchise rights

14. Termination: Grounds for termination and termination procedures

15. Post-Termination Obligations: Obligations and restrictions after agreement termination

What sections are optional to include in a Sub Franchise Agreement?

1. Insurance Requirements: Specific insurance coverage requirements - include if the business type has particular liability risks

2. Supply Chain Obligations: Requirements for purchasing from approved suppliers - include if there are mandatory supply arrangements

3. Employee Training Standards: Detailed employee training requirements - include for service-based franchises

4. Property Requirements: Specific requirements for premises - include for location-based businesses

5. Environmental Compliance: Environmental standards and compliance - include for businesses with environmental impact

6. Digital Presence: Online presence and e-commerce requirements - include for businesses with significant digital operations

What schedules should be included in a Sub Franchise Agreement?

1. Schedule 1 - Territory Description: Detailed description of the granted territory including maps and boundaries

2. Schedule 2 - Initial Fees and Ongoing Payments: Detailed breakdown of all financial obligations

3. Schedule 3 - Operating Manual Summary: Key provisions of the operating manual and compliance requirements

4. Schedule 4 - Trademark Usage Guidelines: Specific rules for using the franchise's trademarks and branding

5. Schedule 5 - Initial Training Program: Details of required initial training for the sub-franchisee

6. Schedule 6 - Approved Suppliers: List of approved suppliers and purchasing requirements

7. Schedule 7 - Required Equipment and Inventory: Specifications for required equipment and initial inventory

8. Appendix A - Form of Confidentiality Agreement: Template confidentiality agreement for employees

9. Appendix B - Compliance Checklist: Checklist of operational and regulatory compliance requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Malaysia

Publisher

Genie AI

Document Type

Franchise Agreement

Cost

Free to use

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