Regulatory Frameworks and Franchise Performance: Evidence from Malaysia

Abstract

Franchising has become a dominant expansion strategy in Malaysia, yet its success heavily depends on the effectiveness of the regulatory framework that governs franchise operations. This study investigates the influence of the regulatory framework on brand perception and franchisee performance, with leadership engagement examined as a conditional factor. Grounded in Agency Theory and Institutional Theory, the study employs a quantitative research design using structured questionnaires distributed to 327 respondents across the food and beverage, retail, and education sectors. Data analysis techniques included multiple regression and moderation analysis using PROCESS macro by Hayes (2018). Results indicate that the regulatory framework significantly enhances brand perception (β = 0.54, p < 0.001) and franchisee performance (β = 0.49, p < 0.001), affirming the foundational role of legal and institutional structures (Mokhtar & Abdullah, 2022; Keller, 2020). Moreover, the regulatory framework moderates the relationship between leadership engagement and brand perception (β = 0.18, p < 0.01), confirming its strategic importance beyond legal compliance (Zainuddin & Ibrahim, 2022). These findings extend the franchising literature by highlighting regulation not only as a boundary-setting mechanism but also as a value-creating enabler. The study offers practical implications for policymakers seeking to strengthen franchise governance under the Malaysian Franchise Act 1998 and franchisors aiming to align leadership strategies with institutional expectations (Tan & Low, 2023). Recommendations for future research include extending the model to international franchise settings and exploring other mediating or moderating variables such as innovation capacity or digitalisation. Overall, this study reinforces the regulatory framework as a cornerstone of sustainable franchise growth in Malaysia.