FRANCHISE REGISTRATION IN VIETNAM

In recent years, franchising has become an investment channel that businesses have used to expand into the Vietnamese market and vice versa, as well as the main model for Vietnamese businesses to enter the world market. FRANCHISE REGISTRATION

LawPlus provides customers with the regulations on franchising activities in Vietnam as well as the documents and procedures for registering franchising rights to help customers understand and apply them.

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1. Concept of franchising

1.1. Concept of franchising

According to Article 284 of the Commercial Law 2005, “Franchising” is a commercial activity in which the franchisor allows and requires the franchisee to conduct the purchase and sale of goods and provision of services under the following conditions:

• The purchase and sale of goods and provision of services are carried out in the business form prescribed by the franchisor and are associated with the franchisor’s trademark, trade name, business secrets, business slogans, business symbols, and advertising;
• The franchisor has the right to control and assist the franchisee in operating the business.

In particular, according to Article 3 of Decree 35/2006/ND-CP detailing the Commercial Law 2005 on franchising activities:

• “Franchisor” is a trader who grants franchising rights, including sub-franchisors in the relationship with sub-franchisees.
• “Franchisee” is a trader who is granted franchising rights, including sub-franchisees in the relationship with sub-franchisors.

1.2. Concept of franchising rights

“Franchising rights” include one, some, or all of the following rights: FRANCHISE REGISTRATION

• The right granted by the franchisor to the franchisee to independently .conduct business activities in supplying goods or services according to a system prescribed by the franchisor and associated with the franchisor’s trademark, trade name, business slogans, business symbols, and advertising;
• The right granted by the franchisor to the franchisee to grant primary franchising rights in common;
• A right granted by the sub-franchisor to the sub-franchisee under a common franchising agreement;
• The right granted by the franchisor to the franchisee under a franchising development contract.

2. Rights and obligations of franchising parties

2.1. Franchisor

According to Article 286 of the Commercial Law 2005, the franchisor has the following rights:

• Receive franchise fees;
• Organize advertising for the franchise system and network;
• Regularly or unexpectedly inspect the activities of the franchisee to ensure the uniformity of the franchise system and the stability of the quality of goods and services.
• Except in cases of other agreements.

Obligations of the franchisor:

According to Article 287 of the Commercial Law 2005, the franchisor has the following obligations:

• Provide guidance on the franchise system for the franchisee;
• Provide initial training and regular technical assistance to franchisees to operate the franchise system correctly;
• Design and arrange sales locations, supply services at the expense of the franchisee;
• Ensure intellectual property rights for the object specified in the franchise agreement;
• Treat other franchisees in the franchise system equally;
• Except in cases of other agreements.

2.2. Franchisee

Rights of the franchisee:

According to Article 288 of the Commercial Law 2005, the franchisee has the following rights:

• Request technical assistance related to the franchise system from the franchisor;
• Demand that the franchisor treats other franchisees equally in the franchise system;
• Except in cases of other agreements

Obligations of the franchisee:

According to Article 289 of the Commercial Law 2005, the franchisee has the following obligations:

• Pay franchise fees and other payments under the franchise agreement;
• Invest sufficient infrastructure, financial resources, and personnel to receive the business rights and secrets transferred by the franchisor;
• Accept the control, supervision, and guidance of the franchisor; comply with requirements regarding the design, arrangement of sales locations, and supply of services of the franchisor;
• Keep confidential the business secrets that have been franchised, even after the franchise agreement ends or terminates;
• Cease using the trademark, trade name, business slogan, business logo, and other intellectual property rights (if any) or the system of the licensor upon the termination or expiration of the commercial franchise agreement;
• Conduct operations in accordance with the commercial franchise system;
• Not to sublicense without the consent of the licensor.

3. Commercial franchise agreement

3.1. Content of the commercial franchise agreement

According to the provisions of Article 11 of Decree 35/2006/ND-CP, in case the parties choose to apply Vietnamese law, the commercial franchise agreement may include the following main contents:

• The content of the franchise right.
• Rights and obligations of the licensor.
• Rights and obligations of the franchisee.
• Price, periodic franchise fee, and payment method.
• Term of the agreement.
• Extension, termination of the agreement, and dispute resolution.

3.2. Language of the commercial franchise agreement

The commercial franchise agreement must be made in Vietnamese. In case of franchising from Vietnam to foreign countries, the language of the commercial franchise agreement is agreed upon by the parties.

3.3. Term of the commercial franchise agreement

• The term of the commercial franchise agreement is agreed upon by the parties.
• The commercial franchise agreement may be terminated before the agreed term in the following cases
• The franchisee has the right to unilaterally terminate the commercial franchise agreement if the licensor violates the obligations stipulated in Article 287 of the Commercial Law.

The franchisor has the right to unilaterally terminate the franchise agreement in the following cases:

• The franchisee no longer has a business license or an equivalent document required by law to carry out the business activities under the franchise.
• The franchisee is dissolved or bankrupt according to Vietnamese law.
• Franchisee violates the law in a serious manner that may cause significant damage to the reputation of the franchise system.
• The franchisee fails to remedy non-fundamental breaches of the franchise agreement within a reasonable period of time, despite receiving written notice from the franchisor requesting the remediation of such breaches.

4. Procedures and documents for registering franchise activities

4.1. Procedures for registering franchise activities

According to Article 20 of the Commercial Law 2005, the intending franchisor is responsible for registering the franchise activities according to the following procedures:

• Submitting a dossier requesting registration of franchise activities to the competent state agency as stipulated in Article 18 of this Decree.
• Within a period of 05 working days from the date of receiving a complete and valid dossier, the competent state agency shall register the franchise activities in the Register of franchise activities and notify the trader in writing of the registration.
• In case the dossier is incomplete or invalid, within a period of 02 working days from the date of receiving the dossier, the competent state agency must notify the intending franchisor in writing to supplement and complete the dossier.
• The deadlines specified in this provision do not include the time for the intending franchisor to amend or supplement the dossier requesting registration of franchise activities.
• If the competent state agency refuses to register within the prescribed deadline, it must notify the intending franchisor in writing of the reasons for the refusal.

Note: The procedure for registering contracts for transferring the right to use industrial property objects is carried out in accordance with the regulations of the law on industrial property ownership.

4.2. Application for registering franchise operations

To Apply for registering franchise operations at the Ministry of Commerce, the required documents includes:

• Application for registering franchise operations according to form MD-1 in Appendix II issued together with this Circular;
• Introduction to franchise operations according to the form in Appendix III issued together with this Circular;
• Certified copy of the Certificate of Business Registration or Investment Certificate in case of franchise operations from Vietnam to foreign countries; certified copy of the Certificate of Business Registration or equivalent document of foreign traders confirmed by competent authorities where foreign traders are established in case of franchise operations from foreign countries to Vietnam;
• A Certified copy of the industrial property protection certificate in Vietnam or in foreign countries in case of transfer of the right to use industrial property objects that have been granted protection certificates;
• Documents proving the approval for allowing re-franchising of the initial franchisor in case the franchisee registering franchise operations is a secondary franchisor.

Application file for registering the commercial franchise operation at the Department of Commerce includes:

• Application for commercial franchise operation according to the form MD-2 in Appendix II issued with this Circular;
• Introduction about the commercial franchise according to the form in Appendix III issued with this Circular;
• Certified copy of the Business Registration Certificate or Investment Certificate;
• Certified copy of the industrial property rights protection certificate in Vietnam or in foreign countries in case of transfer of use rights of industrial property objects that have been granted protection certificates;
• Documentation proving the approval for re-franchising by the original franchisor in case the franchisee is a sub-franchisee;

 

The prospective franchisee must pay a fee for registering the commercial franchise operation. The fee rates and the management and use of the fees shall be carried out according to the guidance of the Ministry of Finance.

The above is LawPlus’s analysis of the commercial franchise operation under the.provisions of the Commercial Law 2005 and some related documents. To understand more about the process and procedures for registering commercial franchises, please contact the LawPlus legal team at hotline 02862 779 399, 03939 30522, or email info@lawplus.vn for advice and answers to your questions.