What is the Requirements of Franchising in Vietnam?

As one of the fastest–growing Southeast Asian nations, Vietnam is an economically vibrant market that is offering franchisors an array of opportunities. However, to comply with the legal requirements, the franchisor could engage franchising lawyers in Vietnam for understanding the legal landscape.

Why franchising in Vietnam?

Vietnam is experiencing strong and promising economic growth, with a large population of around 90 million consumers and a conducive business atmosphere. This makes it the perfect destination for franchisors looking to expand their business to new and exciting markets.

In addition to the sheer size of Vietnam‘s population and its economic prospects, it also has very clear regulations concerning franchising. Vietnam encourages foreign investment, and there are organizational structures and processes in place to ensure that franchisors and franchisees are well protected by the law.

This makes the prospect of franchising in Vietnam even more attractive, as franchisors can rest assured that their business will remain secure. Furthermore, Vietnam is seeing a boom in sectors such as the hospitality, retail and education industries, making it an excellent option for franchising goods and services.

Conditions of franchising in Vietnam

Commercial franchising is an activity adjusted by Commercial law, whereby franchisors permit and require franchisees to undertake by themselves to purchase or sell goods or provide services on the following conditions:

i) the purchase or sale of goods or provision of services shall be conducted in accordance with methods of business organization prescribed by franchisors and associated with the franchisors’ trademarks, trade names, business knows-how, business slogans, business logos and advertisements;

ii) franchisors shall be entitled to supervise and assist franchisees in conducting their business activities.

Commercial franchise contracts must be made in writing or in other forms of equivalent legal validity and registered with Ministry of Industry and Trade excepting some regulated cases which are not required to register but report to Department of Industry and Trade which are domestic franchises and the franchises from Vietnam to overseas.

Rights and obligations of franchisors in Vietnam

Firstly, the franchisors, except having otherwise agreed, have the rights:

i) to receive franchise sums;

ii) to organize advertising for the commercial franchise system and the commercial franchise network;

iii) to conduct periodical or extraordinary inspections of activities of franchisees in order to ensure the uniformity of the commercial franchise system and the stability of quality of goods and services.

In the meantime, the franchisors have the obligations:

i) to supply documents guiding the commercial franchise system to franchisees;

ii) to provide initial training and regular technical assistance to franchisees for managing the latter’s activities in accordance with the commercial franchise system;

iii) to design and arrange places of sale of goods or provision of services at the expenses of franchisees;

iv) to guarantee the intellectual property rights over objects stated in franchise contracts;

v) to equally treat all franchisees in the commercial franchise system.

Rights and obligations of franchisees in Vietnam

For the franchisees, except having otherwise agreed, the franchisees could:

i) request franchisors to provide with full technical assistance related to the commercial franchise system;

ii) request franchisors to equally treat all franchisees in the commercial franchise system.

The franchisees have the obligations to:

i) pay franchise sums and other amounts under commercial franchise contracts;

ii) to invest adequate material facilities, financial sources and human resources to take over business rights and know-how transferred by franchisors;

iii) to submit to the control, supervision and instruction by franchisors; to comply with all requirements set forth by franchisors on designing and arrangement of places of sale of goods or provision of services;

iv) to keep secret the franchised business know-how even after the expiration or termination of commercial franchise contracts;

v) to stop using trademarks, trade names, business slogans, logos and other intellectual property rights (if any) or systems of franchisors upon the expiration or termination of commercial franchise contracts;

vi) to manage their activities in accordance with the commercial franchise system; vii) not to sub-franchise without permissions of franchisors.

Besides the above rights and obligations, the parties may supplement others provisions deemed necessary but not contrary to the provisions of law.

How franchising lawyers in Vietnam could help?

Franchising lawyers in Vietnam can provide essential support to franchisees and franchisors alike.

First, they can assist franchisors by helping them to comply with the legal framework that governs franchising in the local, regional, and even international setting. Franchising lawyers in Vietnam can advise on the registration of the franchisor’s trademark, evaluate potential contract agreements, assess the overall legal validity of the franchise operation, and assist with dispute resolution in Vietnam.

On the franchisee side, franchising lawyers can assist them in understanding their rights and obligations as franchisees, helping them to make sound decisions that are legally and economically sound.

Secondly, franchising lawyers can assist in protecting both parties from potential disputes, thereby promoting an effective and efficient business relationship. They can ensure that contracts are well understood and, once in place, regularly monitor the relationship in order to identify and resolve any potential disagreements or misunderstandings between both parties.

This can help to develop an increasingly healthy and mutually beneficial relationship between franchisors and franchisees, protecting both parties‘ financial interests and ensuring the success of the franchise at large while doing business in Vietnam.