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Franchise Act 1998 · Updated to 1 Nov 2023 · Part IV · Conduct of Parties and Termination of Franchise Agreement

31. Termination of franchise agreement

(1)

No franchisor or franchisee shall terminate a franchise agreement before the expiration date except for good cause as provided in subsections (2) and (3).

28 Laws of Malaysia ACT 590

(2)

“Good cause” shall include, but is not limited to—

(a)

the failure of a franchisor or a franchisee to comply with any terms of the franchise agreement or any other relevant agreement entered into between the franchisor and franchisee; and

(b)

the failure of a franchisor or the franchisee to remedy the breach committed by him or any of his employees within the period stated in a written notice given by the franchisor, which shall not be less than fourteen days, for the breach to be remedied.

(3)

“Good cause” shall include, but without the requirement of notice and an opportunity to remedy the breach, circumstances in which the franchisor or franchisee—

(a)

makes an assignment of the franchise rights for the benefit of creditors or a similar disposition of the assets of the franchise to any other person;

(aa)

becomes bankrupt or insolvent;

(b)

voluntarily abandons the franchised business;

(c)

is convicted of a criminal offence which substantially impairs the goodwill associated with the franchisor’s mark or other intellectual property; or

(d)

repeatedly fails to comply with the terms of the franchise agreement.

Terms defined in s 4

franchise
Defined · s 4
“franchise” means a contract or an agreement, either expressed or implied, whether oral or written, between two or more persons by which— Franchise 9 (a) the franchisor grants to the franchisee the right to operate a business according to the franchise system as determined by the franchisor during a term to be determined by the franchisor; (b) the franchisor grants to the franchisee the right to use a mark, or a trade secret, or any confidential information or intellectual property, owned by the franchisor or relating to the franchisor, and includes a situation where the franchisor, who is the registered user of, or is licensed by another person to use, any intellectual property, grants such right that he possesses to permit the franchisee to use the intellectual property; (c) the franchisor possesses the right to administer continuous control during the franchise term over the franchisee’s business operations in accordance with the franchise system; and (d). (e) in return for the grant of rights, the franchisee may be required to pay a fee or other form of consideration. (f).
Open s 4
franchise agreement
Defined · s 4
“franchise agreement” means a contract or an agreement made between a franchisor and a franchisee in respect of a franchise in return for any form of consideration but does not include any contract or agreement made for the purpose of direct selling as provided by the Direct Sales Act 1993;
Open s 4
franchisee
Defined · s 4
“franchisee” means a person to whom a franchise is granted and includes, unless stated otherwise in this Act— (a) a master franchisee with regard to his relationship with a franchisor; and (b) a subfranchisee with regard to his relationship with a master franchisee;
Open s 4
franchisor
Defined · s 4
“franchisor” means a person who grants a franchise to a franchisee and includes a master franchisee with regard to his relationship with a subfranchisee, unless stated otherwise in this Act;
Open s 4
mark
Defined · s 4
“mark” includes a trade mark, service mark, symbol, design, brand, heading, label, ticket, name, signature, word and letter or any combination of them;
Open s 4
person
Defined · s 4
“person” includes a natural person, corporation, partnership, association, firm, joint venture or trust;
Open s 4

Report

Read on from s 32

Part V

Franchise Advisory Board

Read on from Part V

Part VI

Offences and Penalties

Read on from Part VI

Part VII

Enforcement

Read on from Part VII

Part VIII

Miscellaneous

Read on from Part VIII