What are rights and obligations of parties to commercial franchise contracts in Viet Nam?

Franchising has been a popular business for many years. A number of famous franchise models in the world such as McDonalds, KFC, Burger King have been present in Vietnam. What is the current Vietnamese law on franchising? Let’s find out with Lawyer X through the following situation: “I plan to open a franchised milk tea shop from a milk tea brand quite popular with young people. I would like to refer to rights and obligations of parties to franchise agreements under Viet Nam’s law. Looking forward to your consulting”

Legal grounds

2005 Commercial law

What is commercial franchise?

Commercial franchise means a commercial activity whereby franchisors permit and require franchisees to undertake by themselves to purchase or sell goods or provide services on the following conditions:

– The purchase or sale of goods or provision of services shall be conducted in accordance with methods of business organization prescribed by franchisors and associated with the franchisors’ trademarks, trade names, business knows-how, business slogans, business logos and advertisements.

– Franchisors shall be entitled to supervise and assist franchisees in conducting their business activities. Commercial Franchise contracts

Goods and services permitted for commercial franchise business are those not on the list of goods and services banned from business. In case goods or services are on the list of goods and services restricted the List of goods and services subject to conditional business, the enterprise may do business only after it is licensed by competent state agency, documents of equivalent value or qualified for business.

Commercial Franchise contracts must be made in writing or in other forms of equivalent legal validity. Franchise contract must be made in Vietnamese. In case of franchising from Vietnam to abroad, the language of the commercial Franchise contract shall be agreed upon by the parties. In case the parties choose to apply Vietnamese law, a commercial Franchise contract may contain the following principal details:

– Content of commercial rights.

– Rights and obligations of the franchisor.

– Rights and obligations of the franchisee.

– Price, periodical franchise fee and payment method.

– Effective term of the contract.

– Contract extension, termination and dispute resolution.

Rights and obligations to parties to Franchise contracts

*Rights of franchisors

Unless otherwise agreed, franchisors shall have the following rights:

 – To receive franchise sums.

– To organize advertising for the commercial franchise system and the commercial franchise network.

– To conduct periodical or extraordinary inspections of activities of franchisees in order to ensure the uniformity of the commercial franchise system and the stability of quality of goods and services.

Obligations of franchisors Unless otherwise agreed, franchisors shall have the following obligations:

– To supply documents guiding the commercial franchise system to franchisees;

– To provide initial training and regular technical assistance to franchisees for managing the latter’s activities in accordance with the commercial franchise system;

– To design and arrange places of sale of goods or provision of services at the expenses of franchisees;

– To guarantee the intellectual property rights over objects stated in Franchise contracts; 5. To equally treat all franchisees in the commercial franchise system.

*Rights of franchisees

 Unless otherwise agreed, franchisees shall have the following rights:

– To request franchisors to provide fully technical assistance related to the commercial franchise system;

– To request franchisors to equally treat all franchisees in the commercial franchise system.

*Obligations of franchisees

 Unless otherwise agreed, franchisees shall have the following obligations:

– To pay franchise sums and other amounts under commercial Franchise contracts;

– To invest adequate material facilities, financial sources and human resources to take over business rights and know-how transferred by franchisors;

– To submit to the control, supervision and instruction by franchisors; to comply with all requirements set forth by franchisors on designing and arrangement of places of sale of goods or provision of services;

– To keep secret the franchised business know-how even after the expiration or termination of commercial Franchise contracts;

– To stop using trademarks, trade names, business slogans, logos and other intellectual property rights (if any) or systems of franchisors upon the expiration or termination of commercial Franchise contracts;

– To manage their activities in accordance with the commercial franchise system;

– Not to sub-franchise without permissions of franchisors.

*Sub-franchise to a third party

– A franchisee shall be entitled to sub-franchise to a third party (referred to as subfranchisee) if it is so consented by the franchisor.

– Sub-franchisees shall have the rights and obligations of franchisees provided for in Articles 288 and 289 of Commercial law.

*Registration of commercial franchises

Before franchising, the intended franchisor must register with the competent authority in accordance with Decree 35/2006/ND-CP. The competent agency to register commercial franchising shall register the trader’s commercial franchising in the Commercial Franchise Register and notify the trader in writing the traders of such registration.

When there is any change to the registered information specified in Clauses 2 and 3, Article 19 of Decree 35/2006/ND-CP, the franchisor is responsible for notifying the competent state agency where it has been registered for franchising within 30 days from the date of change of registered information.

The Government shall specify the conditions for conducting business under commercial franchise and the order and procedures for registering commercial franchises.

Acts of law violation in commercial franchising

– Traders involved in commercial franchising that commit the following acts of violation shall, depending on the nature and seriousness of their violations, be administratively sanctioned according to the provisions of law on handling of administrative violations:

+ Conducting commercial franchising business without having fully satisfied the specified conditions;

+ Granting commercial franchises for goods or services banned from business;

+ Breaching the obligation to supply information in commercial franchising specified in this Decree;

+ Including in written introductions of commercial franchise untruthful information;

+ Violating regulations on registration of commercial franchising;

+ Violating regulations on notification in commercial franchising;

+ Failing to pay tax(es) according to the provisions of law, but not seriously enough for penal liability examination;

+ Failing to abide by requests of competent state agencies conducting examinations or inspections;

+ Violating other provisions of this Decree.

– Where traders conducting business by mode of commercial franchising commit acts of violation, causing material damage to involved organizations and/or individuals.

Services of Lawyer X

Prestigious professional services: Firstly, the team of consultants and consultants for many years in the field of civil status, and customer support.

On-time: Certainly, with the motto “Get your lawyer right at your fingertips”, we ensure the service always performs on time. The rights and interests of customers always come first.

Cost: Besides, Lawyer X’s service costs are highly competitive; depending on the nature of the particular case. So, we want our guests to have the best possible service experience. Therefore, costs which guaranteed to be the most suitable and economical for customers.

Confidentiality of client information: Finally, all personal information of clients Lawyer X will be 100% confidential.

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