Be more stringent in selection of franchisors, PNS told

…Only resilient and profitable franchise systems should be on the list," MCAM executive secretary Datuk Nadzim Johan told a news conference in Kuala Lumpur yesterday. He said approving and disbursing loans should not be the end of PNS' task in developing franchisees. Rather, the agency should monitor the performance of franchisees who obtained financing, as a yardstick of its success.

http://www.btimes.com.my
September 16, 2009

DatuhNadzim(1).jpg

Be more stringent in selection of franchisors, PNS told
Hamisah Hamid

THE Muslim Consumers Association of Malaysia (MCAM) has called on Perbadanan Nasional Bhd (PNS) to be more stringent in its selection of franchisors under its programme, so as to ensure that their franchisees are profitable.

"We don't want franchisors whose franchisees have closed down their business to be allowed in the PNS programme. Only resilient and profitable franchise systems should be on the list," MCAM executive secretary Datuk Nadzim Johan told a news conference in Kuala Lumpur yesterday.

He said approving and disbursing loans should not be the end of PNS' task in developing franchisees.

Rather, the agency should monitor the performance of franchisees who obtained financing, as a yardstick of its success.

PNS offers soft loans at 4 per cent interest to potential Bumiputera franchisees wanting to work with franchisors on the PNS list.

Some 30 Bumiputera franchisees have sought MCAM's help as they did not get solutions to their problems after they approached the Malaysian Franchise Association, PNS and the former Ministry of Entrepreneur and Cooperatives Development.

These franchisees, who received financing from PNS, have been forced to close shop after they failed to break even within two to three years, despite having complied fully to the franchise system and procedures.

Some claimed that their franchisors did not adhere to the franchise agreement and believed that the agreement contained unfair terms and clauses. Others said their franchisors are supplying raw materials at higher prices which is squeezing on already tight profit margins.

These franchisees of alleged franchisors including shoe chain Jukebox, fastfood restaurant Marry Brown and water vending operator WaterShop are now burdened with debts to their franchisors and PNS. Some had resorted to borrowing from Ah Longs when they were still in business in order to sustain the cost of running the outlets.

Nadzim said the government, particularly the Domestic Trade, Cooperatives and Consumerism Ministry, should look seriously into the matter so that future Bumiputera franchisees who obtain loans from PNS can avoid making losses.

"Franchises are said to be idiot-proof, but why are these people losing money, which could lead to bankruptcy if they fail to serve their loans?

"Most of these people have been in business before, so we cannot say they are inexperienced," he said.

The weakness may lie in the relevant agencies that are responsible for developing franchisees and overlook the franchise industry, he added.

Former Marrybrown franchisee, Norhayati Agus, alleged that franchisor Marry Brown Fried Chicken Sdn Bhd had boasted a profit margin of 60 per cent but yet her outlet could not prove the claims.

Norhayati and another franchisee, Muhd Hizal Mustafa, claimed that Marry Brown is making profit from selling raw materials at higher prices to its franchisees.

http://www.btimes.com.my/Current_News/BTIMES/articles/8MARAH-2/Article/


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