A franchise is a legal and commercial relationship between the franchisor (the person or company leasing the benefits rights to the business name and system) and the franchisee (an individual or group wishing to use that identification in a business). The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchisor or that meet the franchisor's quality standards.

Franchising is based on a contract (franchise agreement) between the franchisor and franchisee. The franchisor provides the business expertise (marketing plans, management guidance, financing assistance, site location, training, etc.); the franchisee brings to the franchise operation the entrepreneurial spirit and drive necessary to make the franchise a success. In Malaysia, franchise is governed by the Franchise Act 1998 that came into force in 1999. This Act applies throughout Malaysia to the sale of franchise in Malaysia

The registration of a franchise shall continue to be effective unless the Registrar issues an order made by written notice to the Applicant or the franchisor to suspend, terminate, prohibit or deny the sale or registration of the franchise.

Franchising contains benefits for both parties: the franchisor achieves rapid expansion with limited capital outlay; the franchisee benefits from the risk reduction of the investment by owning and operating a business which utilises proven methods and procedures.