Overview of Regulations on Franchising Activities
In accordance with the Vietnam’s commitment to the World Trade Organization (WTO), Vietnam began opening its retailing market for foreign traders from 1 January 2008, and in fact, such opening has positive affect on the franchising activities in Vietnam of both domestic and foreign business entities. As reported by the International Franchising Association, more than 70 business systems are currently under franchise contracts and developing in Vietnam with the present of huge foreign corporations, such as KFC, Lotteria, Jollibee, Gloria Jean, Louis Vuitton and Gucci, and of local companies, including Trung Nguyen coffee, “Pho 24” (noodles), T&T shoes, Qualitea, Ninomax, Kinh Do Bakery, etc. However, such figure (70) seems much lower than the possibility of a potential market like Vietnam.
Currently, franchising activities in Vietnam are mainly governed by the Commercial Law 2005, effective from 1 July 2007, and the documents guiding implementation of the Commercial law, comprising the Decree No. 35/2006/ND-CP dated 31 March 2006; the Circular No. 09/2006/TT-BTM dated 25 May 2006; and the Decision No. 106/2008/QD-BTC of 17 November 2008. Accordingly, some important provisions are as follows:
(i) Conditions in respect of franchise
- Goods and services which are subjects of the business system to be franchised are not the ones on the list of goods and services on which the business is prohibited in accordance with the prevailing law of Vietnam.
- Franchisor must (i) register its franchising activities with the Vietnam competent authority, regardless the franchisor is a primary franchisor or secondary franchisor, i.e. primary licensee in a master franchise agreement; and (ii) business system to be franchised must be operated by the franchisor or by primary franchisee (in case of sub-franchise) for at least one year.
- Franchisee must be licensed doing business in lines appropriate to the subject of the business system to be franchised.
(ii) Application for registration of franchising activities of a franchisor must be made by the franchisor to the Ministry of Industry and Trade in case of overseas franchising activities, including those from export processing zones, non-tariff zones and other separate customs areas into Vietnamese territory and vice versa. Otherwise, the application shall be made to the Department of Industry and Trade at the provincial level of the province or city where the prospective franchisor registers its business operations.
(iii) A franchise contract must be in written form, and in case an overseas franchise from foreign to Vietnam, the contract must be made in Vietnamese.
With the basic legal frame and the opening of the Vietnam retailing market, it is expected to open a positive panorama for Vietnam franchising market in the near future. Especially, it is forecasted that the franchising market in Vietnam, despite of certain the problems of which the biggest one is the weakness in enforcement of intellectual property rights in Vietnam, may be “hotter” in the second half of this year.
By Nguyen Thi Hong Anh, Head of IP & Technology Group
Indochine Counsel
Unit 4A2, 4th Floor, Han Nam Office Bldg.
65 Nguyen Du, District 1
Ho Chi Minh City, Vietnam
(Tel) +848 3823 9640
(Fax) +848 3823 9641
anh.nguyen@indochinecounsel.com
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