Franchise under the current laws

Franchising (or franchising) is one of the popular ways to expand your business. Not only in Vietnam but also worldwide, many businesses have been successful with this business approach.

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Currently, Vietnamese law also fully and clearly stipulates the legal corridor for franchise procedures. In order to support customers to better understand, please provide the detailed analysis in the following article:
What is a franchise?
Under Article 284 of the 2005 Commercial Law, it can be understood that franchising is considered a commercial activity. In particular, the franchisor – a trading company (in English name is the franchisor) will transfer the business model, trademarks, services, business secrets, business logos, advertising to the franchisee ( English name is franchisee).
So what is a trading company? Based on the above law, it can be understood that a commercial company is a company or enterprise that owns commercial rights and has a franchise demand.
Transfer of rights is subject to the pre-agreed conditions. The franchisee may have to pay a franchising fee and a percentage of recurring revenue to the franchisor in a certain period of time, depending on the agreement of the parties in the franchise contract.
Conditions for businesses to implement franchise procedures?
According to the 2005 Commercial Law, Section 1 of Decree 35/2006 / ND-CP dated March 31, 2006 of the Government detailing the 2005 Commercial Law, franchising must meet the conditions and is carried out on statutory principles, namely:
Traders are allowed to grant commercial rights when the business system intended to be used for franchising has been in commercial operation for at least 1 year. How is the 1 year time calculated? This time is counted from the date of issuance of the certificate of business location of the first store belonging to the business system of the trader. Shops and business systems of enterprises must carry out actual business activities.
Activities of purchase, sale, service provision from a franchisee must follow the basic model that the franchisor is carrying out. These activities should also be associated with the trademarks, trade names, business know-how, business slogans, business logos and advertising of the franchisor;
The franchisor has the right to inspect, survey and even initiate a lawsuit and stop the franchise contract when there are grounds to believe that the franchisee does not comply with the previous agreements, not in accordance with the principles and regulations franchisee required. In many cases, ineffective business practices affect franchises, goods and services are also the reason that the franchisor terminates or sues the franchisee.
Characteristics of franchise activities in Vietnam
Franchising is very common. Many businesses are conducting franchise activities in Vietnam such as MC Donald’s, KFC, Pizza Hut … According to the relevant laws, franchise activities have the following characteristics:
First: The object of the franchise is commercial rights
As mentioned above, franchising is understood as the right to conduct business of goods and services in the manner prescribed by the franchisor, along with the use of labels, trade names and secrets. business, business slogan, business logo, advertising … of the franchisor.
In a franchise relationship, the main content is the franchisor’s permission to the franchisee to use his / her commercial rights.
Second: There is always a close support relationship between the franchisor and franchisee.
The relationship between the franchisor and the franchisee is a prerequisite for determining whether the activity is a franchise or not.
The intimacy of the relationship between the franchisor and the franchisee is shown right after the parties have signed and conducted the franchise. Accordingly, the franchisor must provide materials, train, guide and assist the franchisee to understand and implement goods and service business activities according to set standards. During operation, the franchisor must regularly provide technical assistance and training to the franchisee’s personnel for new applications that are common to the whole system.
Third: In franchising, there is always the franchisee’s control over the franchisee’s performance.
The purpose of the control is to ensure that the franchisee fulfills the obligations, responsibilities and commitments in the contract. At the same time, this feature helps the Franchisor promptly detect violations related to the franchisor’s commercial rights.
The laws of most countries around the world recognize the franchisee’s control over the franchisee’s business operations. Accordingly, the franchisor may periodically or irregularly inspect the franchisee’s exercise of commercial rights.

This power of the franchisor has really created an important adhesive in building the consistency of the franchise system and the stability of the quality of goods and services.
Franchising is a preeminent business. Franchisers can both expand business, develop brands, distribute their products as quickly as possible to customers while still saving costs and potential for businesses. The franchisee is allowed to receive a reputable brand in the market, take advantage of modern production and business processes, minimize risks and costs in brand promotion.
Meeting market demand, Hung Phuc Law Office provides the following franchise services:
Counseling on the legal regulations related to the franchise procedure;
Drafting, reviewing and evaluating franchise contracts;
Support in preparing records and documents for carrying out procedures;
Support and join customers to negotiate with partners / third parties to ensure the best interests of customers;
Counseling on the optimal franchise plan to ensure the interests of customers; with a team of lawyers, experienced experts in consulting for franchise units.
If you need advice, franchise support / franchising or have any questions regarding this activity, please contact us at Hotline 0982.466.166 or email phapluatdoanhnghiepso1@

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