A Brief Legal Guide to Franchising Regulations in Vietnam

Commercial franchising continues to serve as an exceptionally powerful mechanism for business expansion. Understanding the legal framework within Vietnam is absolutely vital for any trader or enterprise planning to establish a franchise network in the country. The regulatory framework addresses franchise conditions, disclosure and the parties’ contractual obligations. The following article by Jurion & Partners will help readers with a brief guide on this topic.

1. The Legal Framework and Core Definitions of Franchising

In Vietnam, commercial franchising operates under a structured legal framework designed to regulate commercial activities and protect participating entities. The foundational basis for these rules is the Commercial Law of 2005.

Article 284 within the Commercial Law 2005 defines franchising as a commercial activity where a franchisor grants a franchisee the right to conduct the purchase and sale involving goods or service provision. Under this definition, the business must operate according to a format established by the granting party. Furthermore, the operation must closely associate with several key elements linked to the franchise system:

• Trademarks
• Trade names
• Business slogans
• Advertising logos

Decree No. 35/2006/ND-CP provides detailed instructions to implement these rules. Understanding these legal texts is an absolute necessity for investors entering the Vietnamese market. A compliance review can identify missing registrations, disclosures and contractual provisions before operations begin.

2. Mandatory Conditions for Franchising Operations

Before launching a franchise network, the law mandates specific operational conditions. Recent legislative updates have modernized these requirements to promote a more favorable business environment. According to Article 5 within Decree No. 35/2006/ND-CP, amended by Decree No. 08/2018/ND-CP, the government streamlined the conditions required to grant commercial rights.

• Operational History Requirement: The primary condition dictates that a trader may only grant commercial rights if the intended business system has been operating for at least one year. Previously, complex rules demanded extensive operational history from both sides. However, Decree No. 08/2018/ND-CP eliminated several burdensome barriers, making the market more accessible.
• Registration Procedures: Administrative procedures differ depending on the originating location. Foreign franchisors bringing a brand into Vietnam must register the franchise with the Ministry of Industry and Trade. Conversely, purely domestic franchise networks do not face this registration mandate but remain subject to reporting requirements sent to the local Department of Industry and Trade.

3. Contractual Obligations and The Franchising Agreement

The franchise contract functions as the central pillar within the commercial relationship. To prevent information asymmetry, Vietnamese regulations impose strict disclosure rules.

Article 8 within Decree No. 35/2006/ND-CP requires the franchisor to supply a franchise contract copy and a formal written introduction detailing the franchise system to the prospective franchisee. The franchisor must deliver these documents at least 15 working days prior to the contract signing date, unless the two parties agree otherwise.

Furthermore, Article 285 within the Commercial Law 2005 stipulates that the franchise agreement must exist in writing or another legally equivalent format. When the involved parties elect to apply Vietnamese law, the contract needs to cover several mandatory provisions:

• The exact franchised commercial right scope
• The specific rights and obligations assigned to each party
• The periodic franchise fees and the payment methods
• The total agreement term

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