Foreign commercial franchise in Vietnam

Nowadays, Vietnam is one of the largest commercial franchise market in the region and the world. Expanding market through commercial franchise could save time and money as well as guarantee benefits for the franchisor; simultaneously, the franchisee gets the business secrets and can use the brand. This can create a win-win situation for the franchisor and the franchisee. Foreign investors can sign commercial franchising contracts with Vietnamese franchisee. In order to help foreign investors establish an overview about foreign commercial franchise in Vietnam, Viet An Law Firm collects and provides some basic information as follows:

Legal documents:

• The Law on Investment 2014;
• The Law on Commerce 2005;
• Decree No.35/2006/NĐ-CP on detailed implementation of the Law on Commerce on commercial franchise activities;
• Circular No. 09/2006/TT-BTM providing guidelines on commercial franchise registration.

Franchising from overseas to Vietnam (foreign commercial franchise in Vietnam):

• The business system intended to be franchised to Vietnam has been operated for at least 01 year;
• Finish registering for commercial franchise;
• Franchised goods, services are not in the list of banned goods and services from business;
• If the goods, services are in the list of restricted goods and services business or the list of conditional goods and services; the company shall run business after being granted the business license or equivalent papers or satisfy business conditions.

Step 1: Registering for commercial franchise activities

In accordance with clause 1 Article 17 of Decree No. 35/2006/NĐ-CP, foreign franchisor need to register for commercial franchise activities.

An application for commercial franchise activities includes:

• A written application for commercial franchise activities (using the form MĐ-1 in the Annex II – Circular No.09/2006/TT-BTM);
• A written description of commercial franchise (using the form in the Annex III – Circular No.09/2006/TT-BTM);
• Copy of the Business Registration Certificate or equivalent papers of the foreign franchisors. Those papers must be confirmed by the competent agencies in their country;
• Copy issued from the original or notarized copy or copy provided with the original for comparison of the protection title for industrial property rights in Vietnam or overseas in case of licensing industrial property rights which have been granted protection titles;
• Papers providing approval of the primary franchisor to grant permission to the foreign franchisor (the applicant in this case) is the secondary franchisor.

Submission place: The Ministry of Industry and Trade

The process:

The Ministry of Industry and Trade receive the application. If the application is full and valid, the Ministry shall issue the receipt to the applicant. If the application is not full and invalid, the Ministry shall inform the applicant with a written notice in order to supplement, adjust the application. The foreign franchisor is entitled to require the Ministry of Industry and Trade explain their requirements and they shall answer.

Within 05 days from the date of receipt of the valid application, the Ministry of Industry and Trade shall register the commercial franchise activities in the book of commercial franchise and inform the foreign franchisor. In case of refusal, the Ministry shall grant a written respond providing explanation.

Step 2: Signing commercial franchise contract

Formality: Written contract or other equivalent formalities.

Contents: Parties are able to negotiate and reach agreement on the commercial franchise contract. Article 11 Decree No.35/2006/NĐ-CP regulates that if parties apply the laws of Vietnam, the contract may contain some main articles as follows:

• Contents of franchised commercial rights;
• Rights and obligations of the franchisor;
• Rights and obligations of the franchisee;
• Price, periodical franchise fee and payment method;
• Valid term of the contract;
• Renewal and termination of the contract; dispute settlement.

Governing law: As mentioned above, the governing law can be the laws of Vietnam or foreign laws depending on parties’ negotiation.

Foreign investment services in Viet An Law Firm:

• Consult about regulations on foreign investment in Vietnam;
• Consult about procedures, process, documents for foreign investment registration in Vietnam;
• Consult about business sectors and conditions applied for each one for foreign investors;
• Consult about commercial franchise and commercial franchise contract;
• Consult about legal issues relating to tax, labor, contracts, social insurance…

Clients seeking for legal advice on regulations and procedures applied for foreign investors in Vietnam, please feel free to contact Viet An Law Firm for more information!