In the process of strong economic integration, trade and exchange activities are developing more and more. In particular, the commercial franchising activity is taking place in popularity because of its beneficial nature for both parties. To facilitate readers interested in this activity, LSX Lawfirm will give you an article about: “Franchise by territory in Vietnam”, as follows:
Legal grounds
Commercial Law 2005.
Franchise concept in Vietnam
To understand the popular forms of franchising today, the first thing to understand is what is a franchise? The Commercial Law 2005 stipulates:
Franchising is a commercial activity whereby the franchisor permits 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 shall be conducted in accordance with the manner of business organization prescribed by the franchisor and shall be associated with the trademark, trade name, business secret, and business slogan. , business logo, advertising of the franchisor;
The franchisor has the right to control and assist the franchisee in running the business.
Thus, franchising can be understood as commercial activities between specific units, in which the franchisor allows and requires the franchisee to conduct the purchase and sale of goods and provide services. under pre-agreed terms.
Some popular forms of franchising in Vietnam
Depending on business purposes, budget or operational criteria, businesses can choose the form of commercial business that is suitable for them. Here, LSX Lawfirm offers some popular franchise forms today
Franchise by territory
Franchising by territory has several forms as follows:
- Domestic franchising: Vietnamese brands have now also begun to develop franchising activities between businesses. This activity helps businesses with brands promote their images, earn great profits, and save construction costs when using brands. For example, AHA Cafe brand is present in many provinces such as Hanoi, Ha Long, etc.
- Franchising from Vietnam to abroad: It is the franchising of Vietnamese brands abroad. Some of the famous brands of Vietnam franchising abroad mentioned such as: 24h pho brand located and franchised in many countries and territories: Australia, Korea, Hong Kong, Macao… Or brand Trung Nguyen Coffee also franchised to many countries around the world
- Franchise from abroad to Vietnam: This is the form in which foreign brand owners invest in Vietnam in the form of franchising. Some famous brands mentioned such as: Lotteria sold and transferred to Vietnamese investors, Starbucks brand coffee, KFC fried chicken brand,etc.
Franchising according to business criteria
According to business criteria, there are several forms of franchising as follows:
- Product distribution franchising: This is a form in which the franchisor allows the franchisee to distribute the products they produce and their services within a certain area and time. However, the franchisee can only use the logo, brand name (trade mark), logo, slogan (slogan)… in business activities and promotion. The industries that use this form of franchising often belong to the soft drink manufacturing industry, the auto and truck industry, auto parts, gasoline, etc. For example: Coca Cola, Ford cars,etc.
- Franchising using the business formula, also known as business franchising: This is the most common form of franchising. Accordingly, the franchisor not only allows the franchisee to distribute products under their own brand name, but also to transfer business techniques, business management formula and support. to the franchisee’s employees. Popular in the fields of restaurants, cafes, milk tea,etc.
Franchising according to operational development goals
In this franchise criterion, it divided into categories such as:
One is, Exclusive Franchise (Master franchise):
- This is the most popular and fastest form of franchising in expanding the brand to foreign countries. The brand owner will choose and designate certain partners in the country where he or she wants to bring that brand into the market to act as the exclusive franchise partner for the business and distribution of products and services. of the brand. This partner can be an individual or a company, and the scope of the exclusive business area can be a city or a whole country.
- At the same time, the franchisee will have to pay an initial franchise fee to the transferor. But in return they have the right to actively open more stores or sell franchises to any other individuals or companies within the area they can control.
Second, regional franchise:
This is a form of franchising in which the buyer will receive a franchise from the brand owner or master franchise buyer to resell to single-unit franchisees in the region. specified in accordance with the agreement with the franchising company. It is related to Franchise by territory in Vietnam.
Third, individual franchise (single-unit franchise):
- This form of franchising will be suitable for individual franchising applied to each overseas partner and suitable for countries located in a certain area.
- Franchise fee is not divided to any intermediary partners. When choosing to transfer in this form, the brand owner can work and check with each franchisor. However, this form requires a large-scale operating machine with stages such as personnel, governance … from the brand owner. For example, some brands such as Lotteria, KFC, Jolibee…
Fourth, Area development franchise:
- This form of regional franchising gives the franchisees exclusive rights to the brand within a certain scope and term.
- The regional development franchisee is not entitled to resell the franchise to anyone, whether it is an individual, unit or company.
- In order to have the exclusive rights in a certain area, the franchisor to develop the area must pay a relatively high initial franchise fee and must commit to developing how many stores/store chains over a period of time. initial agreement period. Besides, if the agreement in the contract does not meet, the exclusive position will lost.
Related article: Commercial franchise that foreigners should know in Vietnam
Procedures for franchising from abroad to Vietnam
You can also refer to the article related to Registration of commercial franchises in Vietnam.
Related questions about Franchise by territory in Vietnam
So, a franchisee entitled to sub-franchise to a third party (referred to as sub-franchisee) if franchisor consented it.
Sub-franchisees shall have the rights and obligations of franchisees; provided for in Articles 288 and 289 of Vietnam Commercial Law 2005.
Before granting commercial franchises, intended franchisors must register them with the Trade Ministry. Then, the Government shall specify the conditions for conducting business under commercial franchise; and the order; and procedures for registering commercial franchises.
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