Franchising in Vietnam: Legal Guidelines and Registration Process

Franchising in Vietnam has seen remarkable growth in recent decades, driven by relaxed retail regulations and a dynamic entrepreneurial environment. A strong legal framework provides businesses with clarity and protection for franchising activities, while stringent registration requirements promote fair practices within the industry.

Historical Context and Growth of Franchising

The rise of franchising in Vietnam gained momentum around 2009 following the relaxation of retail market regulations to meet WTO obligations. Since then, numerous renowned foreign brands have penetrated the Vietnamese market through franchise networks. Initially dominated by foreign franchisors, there has been a notable increase in Vietnamese brands franchising both domestically and internationally.

Franchising aligns well with Vietnam’s vibrant entrepreneurial culture, offering an appealing avenue for small and medium-sized entrepreneurs seeking to swiftly establish new ventures. Franchising presents a lower-risk alternative with modest capital investment requirements and a proven track record of success compared to launching entirely new businesses. This trend extends across various industries, not just the fast food and beverage sector.

Legal Framework for Franchising in Vietnam

Foundations of Franchising Law

Vietnam’s franchising legal framework is primarily established by the Commercial Law, enacted by the National Assembly on June 14, 2005. This law is further detailed in Decree No. 35/2006/ND-CP, issued on March 31, 2006, and subsequently amended by Decrees No. 120/2011/ND-CP and No. 08/2018/ND-CP. Additional regulations are outlined in Circular No. 09/2006/TT-BTM, issued by the Ministry of Industry and Trade (MOIT) on May 25, 2006, and amended by Circular No. 04/2016/TT-BCT.

Provisions related to franchising are also found in the Law on Intellectual Property and the Law on Technology Transfer. Vietnamese franchise law applies to both domestic and international franchising agreements involving Vietnamese entities.

Relevant Authorities

The MOIT is the primary regulatory body overseeing franchising activities in Vietnam. It provides guidance on franchising policies and legislation and facilitates the registration of franchises. The MOIT accepts franchise registration applications from various entities, including those based overseas or operating within special economic zones. At the provincial level, the Departments of Industry and Trade (DOITs) oversee franchising activities within their regions.

Registration Requirements

Franchise Registration Process

Franchise registration in Vietnam involves specific requirements for both foreign and domestic franchises. Offshore franchisors are required to register their franchising business once, a process overseen by the MOIT.

MOIT Evaluation and Timeframe

The MOIT assesses the submitted documentation for compliance with disclosure requirements. The official timeframe for registration is five working days from the submission of a complete dossier, but practical processing times may extend up to a month.

Consular Legalization and Translation

Foreign documents typically need consular legalization and translation into Vietnamese before submission. While most documents in the franchise dossier require legalization and translation, the application for franchising registration is an exception.

Updating Changes and Periodic Reporting

Franchisors must inform the MOIT within 30 days of any modifications to registered information, particularly changes in the Franchise Disclosure Document. They are also required to periodically report to the MOIT on franchisee investment costs and sample franchise contracts.

Considerations on Franchise Agreements

Franchise agreements in Vietnam allow significant flexibility in negotiating terms. While Decree 35 suggests terms, their inclusion is not obligatory. The franchise agreement itself need not be included in the registration dossier unless it is necessary to register associated intellectual property rights.

Technology Transfer and Legal Obligations

The transfer of technology in a franchise arrangement is subject to the Law on Technology Transfer. Written agreements are required, with specific registration requirements for various circumstances, including transfers involving overseas parties or state capital. Compliance with national interests, health, cultural values, and environmental standards is mandated.

Key Takeaways

Vietnam’s flourishing economy presents lucrative opportunities for foreign investors looking to expand through franchising. Understanding franchise agreements and relevant regulations is paramount for companies intending to pursue this avenue. Both franchisors and franchisees are advised to review relevant regulations meticulously before entering contracts to ensure the enduring success of their business endeavors.