Guidance on Franchise Registration in Vietnam

1. Governing laws:

At this moment, the key governing laws include:

• Commercial Law adopted by the National Assembly on 14 June 2005; and
• Decree No. 35/2066/ND-CP of the Government dated 31 March 2006 providing detailed regulations for implementation of the Commercial Law with respect to franchising activities, as amended in 2011.

2. Conditions for commercial franchising activities

Conditions applicable to franchisors

A business entity may grant a franchise when the business entity satisfies all of conditions as stipulated by Vietnamese laws, particularly: (i) business system to be franchised has been operating for at least 01 year[1], (ii) business entity has registered the franchising activity with the competent body in accrdance with Vietnamese laws, and (iii) goods and services are eligible for franchising.

It is further noted that, an enterprise may only conduct business in goods and services on the list of goods and services in which business is restricted or subject to conditions after such business entity has been issued with a business licence by the competent authority or after it has satisfied the conditions for such business.

Conditions applicable to franchisees

A business entity shall be entitled to receive a franchise when it has business registration appropriate to the subject of the franchise.

Goods and services eligible for franchising

Generally, goods and services are eligible for franchising if they are not on the list of goods and services in which business is prohibited. In addition, business entity may only conduct business in goods and services on the list of goods and services in which business is restricted or subject to conditions after such business entity has been issued with a business licence to do business in respect of such goods or services or after it satisfies the conditions for conducting such business.

Further to the above, with regard to foreign owned capital companies (specializing in the purchase and sale of goods and activities directly related to the purchase and sale of goods), they may only conduct franchising in lines of goods in which such companmy is permitted to provide distribution services pursuant to international undertakings of Vietnam.

3. Commercial franchise contracts

It is noted that, before signing a commercial franchise contract, both the franchisor and the franchisee shall be responsible to provide information relating to the proposed franchising franchise contracts in accordance with the Vietnamese laws.

Contents. If Vietnamese laws are choosed by the parties as the gorverning laws, a comecial franchise contract may contain such main contents items as: contents of franchising; rights and obligations of franchisor and franchisee, price and periodic franchising fee as well as payment method, contract term, contract extension and termination, and dispute resolution. Further, if the franchisor grants the franchisee the right to use objects of industrial property (in addition to contents of franchising), then the transfer of the right to use such objects of industrial property may be provided for in a separate section of the commercial franchise contract. The transfer of the right to use objects of industrial property in a franchise contract shall be governed by Vietnamese laws on industrial property.

Language. A commercial franchise contract must be made in writing and in Vietnamese. In the case of a franchise from Vietnam to overseas, the parties shall agree on the language of the commercial franchise contract.

Term. The term of a franchise contract shall be as agreed by the parties. A franchise contract may be terminated prior to the expiry of the agreed term in such cases as stipulated by Vietnamese laws.

Time when franchise contracts takes effect. A franchise contract shall take effect as from the date of its signing except where the parties agree otherwise. If a franchise contract contains a section on transfer of the right to use objects of intellectual property, such section shall take effect in accordance with Vietnamese laws on intellectual property.

Assignment of franchises. A franchisee may assign the franchise to another proposed franchisee when safisfy the prescribed conditions (such as: the proposed assignee satisfies the conditions applicable to a franchisee, and the original franchisor (i.e the direct franchisor) approves such assignment). The direct franchisor may refuse the transfer of the franchise only in cases provided for by Vietnamese laws.

4. Registration of franchising activities

In principle, before carrying out franchising activities, a Vietnamese business entity or foreign business entity intending to grant a franchise must register its franchising activities with the competent body in accordance with Vietnamese laws. The registration of commercial franchising is not required in case of domestic commercial franchising or in case of Vietnam-to-overseas commercial franchising, however it is required to be reported to the competent authority in accordance with the Vietnamese laws.

Registration Authority

The Ministry of Indsutry and Trade (“MoIT”) shall register the franchising activities from overseas into Vietnam (including those from export processing  zones, non-tariff zones and other separate customs areas into Vietnamese territory in accordance with the law of Vietnam). The body competent to register franchising activities shall be responsible to register the franchising activities of a business entity into the Register of franchising activities and to provide written notification of such registration to the business entity.

Registration Dossier

An application dossier for registration of franchising activities shall comprise: (i) application for registration of franchising activities (made in standard form), (ii) document on introduction about franchise system (made in standard form), (iii) document on the legal status of the proposed franchisor, and certificates of protection in respect of industrial property rights in Vietnam and overseas when a contract involves a transfer of any protected objects of industrial property, and (iv) other supporting documents.

If documents itemized in (ii) and (iii) above are in a foreign language, they must be translated into Vietnamese and certified by a Vietnamese notary office or consularized by a Vietnamese diplomatic body overseas in accordance with the law of Vietnam.

Registration procedures

A proposed franchisor shall submit the application dossier for registration of franchising activities to the competent registration authority. If the application is not complete, within 02 working days from the date of receipt, the registration authority must issue a written notice to request the franchisor to amend or supplement the application. Within 05 working days from the date of receipt of a full and valid application, the registration authority shall register the franchising activities and notify the franchisor of such registration. If the application is rejected, reasons must be provided.

Procedures for registration of a contract transferring the use of objects of industrial property shall be implemented in accordance with the Vietnamese laws on industrial property.

Notification of changes

Generally, if there is a change to the registered information (e.g. legal status of the proposed franchisor, and certificates of protection in respect of industrial property rights in Vietnam and overseas etc), the franchisor shall be responsible to notify the competent registration authority where the franchising activities were registered within 30 days from the date of such change in accordance with the Vietnamese laws.

De-registration

Registration of franchising activities of the franchisor may be revoked if the franchisor ceases its business or changes it business activities, or if the business registration certificate or the investment registration certificate/license of the franchisor is withdrawn.

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[1] In a case a foreign franchisor grants a franchise to a primary franchisee being a Vietnamese business entity, such Vietnamese business entity must operate the franchise business for at least 01 year in Vietnam before sub-franchising.