What is the Requirements 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.

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.

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 demed necessary but not contrary to the provisions of law.

If Client needs more information or request for legal advice regarding commercial franchise in Vietnam, please contact with ANT Lawyers to be assisted.