Franchise Consulting in the Food and Beverage Industry (F&B)

Franchising is one of the most prominent commercial activities today. According to the Vietnam Franchise Association (VFA), there are currently about 300 domestic and international franchise brands operating in Vietnam. Among them, franchise brands in the F&B sector account for a significant number. In the following article, Viet An Law is pleased to introduce our Franchise Consulting in the Food and Beverage Industry (F&B).

Overview of Franchising

According to Article 284 of the Commercial Law 2005, franchising is a commercial activity where the franchisor allows and requires the franchisee to conduct the sale of goods and provision of services under specified conditions. Specifically, the parties must adhere to the following conditions:

• The franchisor dictates the organization of business activities and the provision of services.
• The sale of goods and provision of services are associated with the franchisor’s trademarks, trade names, business secrets, business slogans, business symbols, and advertisements.
• The franchisor has the right to control and assist the franchisee in managing business operations.

Thus, franchising can be simply understood as the franchisor allowing another party to conduct business activities under their brand, but the business must comply with the franchisor’s regulations, and the franchisor has the right to control and support the franchisee’s business operations.

Franchising agreements must be formalized in a written contract or other legally equivalent forms.

Only merchants are allowed to participate in franchising activities.

Additionally, the franchisee can sub-franchise goods and services to a third party if approved by the franchisor. This is known as sub-franchising, where the franchisee becomes the sub-franchisor, and the third party becomes the sub-franchisee.

However, franchising cannot be conducted freely; the prospective franchisor must register the franchise with the competent state authority as per legal regulations.

Decentralization of franchise registration activities

According to Article 18 of Decree 35/2006/ND-CP, businesses must register franchising activities with the Ministry of Industry and Trade before franchising in the following cases:

• Foreign business franchising in Vietnam.
• Franchising from export processing zones, non-tariff zones, or separate customs areas into Vietnam.

Thus, all franchising activities from abroad into Vietnam must be registered with the Ministry of Industry and Trade.

Additionally, the following cases do not require franchising registration:

• Domestic franchising.
• Franchising from Vietnam to other countries.

Although these cases do not require registration, they must submit annual reports to the Department of Industry and Trade in the province or city where the franchisor’s headquarters is located. The deadline for these reports is no later than January 15 each year.

Conditions for franchising in Vietnam

Conditions for the Franchisor

According to Article 5 of Decree 35/2006/ND-CP, the franchisor must have operated the business system intended for franchising for at least one year. This period ensures the quality of the business system used for franchising, limiting the franchising of ineffective or low-quality business systems.

The franchisor must register franchising activities before conducting franchising.

Currently, regulations on goods and services that do not allow for franchising have been abolished by Article 9 of Decree 08/2018/ND-CP.

Conditions for the Franchisee

Currently, the conditions for the franchisee have been abolished by Article 9 of Decree 08/2018/ND-CP.

However, based on the definition of franchising, it can be affirmed that the franchisee must be a merchant, including sub-franchisees and sub-franchisors.

Franchise Consulting in the Food and Beverage Industry (F&B)

Before conducting franchising activities, the prospective franchisor, including initial and sub-franchisors, must register franchising activities with the competent authority as per regulations.

Required documents for franchising registration:

• Franchising registration application form.
• Introduction to franchising.
• Copy of business registration certificate or investment certificate.
• Copy of industrial property protection certificate in Vietnam or abroad if transferring the use of protected industrial property objects.

For cases requiring the submission of copies, merchants may choose one of the following three forms:

• Copies were extracted from the original register.
• Certified copies.
• Copies presented with the original document for comparison.

In the case of sub-franchising, it is required to submit supporting documents proving the original franchisor’s consent for the sub-franchise.

After submitting the documents to the processing authority, if the documents need modification or supplementation, the Ministry of Industry and Trade will issue a written request for the merchant to amend or supplement the documents within two working days from the date of receipt.

If the documents are valid, the Ministry of Industry and Trade will issue a notification to the merchant within five working days from the date of receipt and register the merchant’s information in the Franchising Activity Register.

Consulting Services on Franchising in the F&B Sector

• Legal advice on franchising regulations in the F&B sector.
• Representing merchants in franchising registration procedures.
• Advising businesses on annual reporting of franchising activities.
• Representing businesses in dealings with state authorities for related procedures.

Above is Franchise Consulting in the Food and Beverage Industry (F&B) of Viet An Law. If you need more detailed information, please contact us for timely support.