Master plan in the works

QUESTION: Can we expect any major milestones for the Malaysian Franchise Industry in 2008?

Answer: Yes. Quite a number of things actually. In an effort to streamline the functions of various government agencies in this context, Deputy Prime Minister Datuk Seri Najib Razak mooted an idea last year to draw out a franchise industry master plan that has thus been developed by the Ministry of Entrepreneur and Cooperative Development (MECD).

The master plan will set out the coordination mechanism between agencies and provide a comprehensive industry profile to enable effective monitoring of the growth of this industry.

The government is also in the midst of the legislative process to amend a few clauses to the Franchise Act 1998 that will allow for a more transparent and franchise friendly investment climate to potential foreign franchisors. Amendments to the said Act will also increase competitiveness among local players.

We hope that the soon to be set-up Franchise Mediation Centre will be sort of a one-stop shop to resolve conflicts between franchisors and franchisees, thus averting the potentially damaging litigious processes.

Last but not least, the government's initiatives to tap into the halal market of 1.5 billion Muslims around the world that's valued at approximately US$580,916 million (RM1,847,313 million) must also include the franchise industry.

We cannot afford to lose out on this huge burgeoning target market.

Q: Will the industry be affected by the expected rises in fuel prices this year?

A: Yes. That's the grim reality. However, these rises in oil costs may be mitigated in a franchise system.

Franchisors apply the dynamics of economies of scale when stocking up ingredients or materials. We buy in bulk and therefore we can leverage on decreased overall costs of purchases.

In this way, the harmful effects of rising inflation could be deflected as a marginal increase in operating expenses for the franchisor and to a lesser extent the franchisee whatever the case maybe.