In recent years, commercial franchising has exploded as one of the most profitable and rapidly expanding business models in Vietnam. From coffee chains, milk tea shops, and fast-food outlets to retail and educational services, franchising allows investors to replicate business models swiftly and effectively.

However, behind the glamour of high returns lies a stringent and complex system of legal regulations. To avoid the risk of costly disputes, investors (both Franchisors and Franchisees) must clearly understand the following legal provisions.

1. What is commercial franchising under the law?

Under Vietnamese law, commercial franchising is not merely “selling a brand” but a comprehensive commercial activity.

Specifically, the Franchisor grants and requires the Franchisee to undertake the purchase and sale of goods or the provision of services under the following conditions:

• The business must be conducted according to the business organization format prescribed by the Franchisor and associated with the Franchisor’s trademarks, trade names, business know-how, business slogans, business logos, and advertisements.

• The Franchisor has the right to control and offer assistance to the Franchisee in the conduct of the franchised business.

Legal Basis: Article 284 of the 2005 Commercial Law.

2. Conditions for conducting franchise activities in Vietnam

The law clearly stipulates the conditions for entities participating in a franchise system to ensure the stability and feasibility of the business model.

For the Franchisor: A trader is permitted to grant commercial rights when the business system intended for franchising has been operating for at least 01 year. (Note: Previously, the law also required the Franchisee to meet strict business registration conditions, but this regulation has been abolished to create more favorable conditions for investors).

Legal Basis: Article 5 of Decree No. 35/2006/ND-CP (as amended and supplemented by Decree No. 120/2011/ND-CP and Decree No. 08/2018/ND-CP).

3. Procedures for registering commercial franchise activities

This is a crucial step that many enterprises often overlook, leading to severe administrative penalties. Depending on the nature of the franchise chain, the procedures vary:

• Inbound Franchise (From overseas into Vietnam): It is mandatory to carry out the procedure for registering commercial franchise activities with the Ministry of Industry and Trade (MOIT) prior to conducting franchise activities.

• Domestic Franchise and Outbound Franchise (From Vietnam to overseas): Registration is not required, but a periodic reporting regime must be submitted to the local Department of Industry and Trade (DOIT) where the trader registers its business.

Legal Basis: Article 17 of Decree No. 35/2006/ND-CP (as amended by Decree No. 120/2011/ND-CP).

4. The Franchise Agreement: Crucial elements to note

The franchise agreement is the “backbone” of the entire transaction. The law requires the contract to be made in writing or in another form of equivalent legal validity.

A standard franchise agreement must contain the following essential contents to protect the legitimate interests of both parties:

1. Content of the commercial rights (Which intellectual property assets are included? What is the territorial scope?).

2. Rights and obligations of the Franchisor (Training, supplying materials, marketing support…).

3. Rights and obligations of the Franchisee (Compliance with quality standards, information confidentiality…).

4. Price, periodic franchise fees, and payment methods.

5. The validity term of the contract and conditions for renewal or early termination.

6. Dispute resolution mechanism (Courts or Commercial Arbitration).

Legal Basis: Article 285 of the 2005 Commercial Law and Article 11 of Decree No. 35/2006/ND-CP.

5. Common legal risks in franchising

BKC Law’s practical consulting experience shows that parties involved in franchising often encounter the following risks:

• Intellectual Property Infringement: The Franchisee arbitrarily alters the logo, formula, or uses the brand outside the contractual scope.

• Disputes over “Franchise Fees”: Failure to clarify hidden fees (marketing fees, software fees, system management fees…) leading to operational conflicts.

• Lack of committed support from the Franchisor: Abandoning the Franchisee after collecting the initial franchise fee.

Contact Us

Commercial franchise activities are always accompanied by complex contracts and intersecting legal regulations among the Commercial Law, Intellectual Property Law, and Competition Law.

BKC Law’s legal consulting services on Commercial Franchising provide comprehensive solutions for entrepreneurs and investors. We assist clients from appraising the Franchisor’s legal dossiers, meticulously drafting and reviewing the Franchise Agreement, to representing clients in carrying out registration or reporting procedures at the Ministry of Industry and Trade / Department of Industry and Trade.

With a team of senior lawyers possessing years of practical experience, solid legal knowledge, and excellent bilingual consulting capabilities, BKC LAW confidently stands as the best legal partner in the market to maximize the protection of your business chain’s interests.

For free legal consultation and detailed case assessment at BKC Law, please contact our team of Lawyers via the following channels:

• Phone: 0901 3333 41

• Email: info@bkclaw.vn

• District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, District 1, Ho Chi Minh City

• Binh Tan Office: 41 Ten Lua Street, Binh Tan District, Ho Chi Minh City

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