Franchising is a commercial activity whereby the franchisor permits and requires the franchisee to conduct the purchase and sale of goods and provide services under certain conditions. A franchise contract is a contract that instructs an enterprise to use a product or an operational process that is an industrial property object and is being protected. Franchising involves the transfer of technology, trademarks or other intellectual property objects. So about the matter “What is commercial franchising under Vietnam law?” Let’s find out with LSX in the article below.
Legal grounds
- Commercial Law 2005
What is franchising under Vietnam law?
Definition of commerical franchising
Regarding the concept of commercial franchising, according to the provisions of Article 284 of the Commercial Law 2005, the specific contents are as follows:
Commercial franchising is a commercial activity whereby the franchisor permits and requires the franchisee to conduct the purchase and sale of goods and provide services under the following conditions:
The purchase and sale of goods and provision of services shall be carried out in the manner of business organization prescribed by the franchisor and shall be associated with the trademark, trade name, business secret, business slogan, business logo, advertisement of the franchisor;
The franchisor has the right to control and assist the franchisee in running the business.
To be able to participate in commercial franchising activities, it is necessary to register for commercial franchising according to the provisions of Article 291 of the Commercial Law 2005 as follows:
– Before franchising, the intended franchisor must register with the Ministry of Trade.
– The Government shall detail the conditions for doing business by mode of franchising and the order and procedures for franchise registration.
Legal characteristics of commercial franchising
It can be said that, no matter what angle franchising is viewed from and in different places, this activity is called by different names, but in essence, franchising is always identified with essentially indistinguishable characteristics, at least in the following salient matters:
Firstly, in the franchising relationship, the independence of the franchisors and franchisees is clearly shown. Although there is mutual support and control between the parties, the legal status and financial responsibility of the parties are always independent of each other.
Secondly, there is unity and synchronism in terms of expression in the way of conducting commercial activities of the franchisor and the franchisee, or more broadly, in the whole franchise system. This is an indispensable feature in the franchise relationship. This unity is obtained and regulated by the special nature of the franchise relationship.
Third, franchising is the combination of many different commercial activities such as: licensing, technology transfer; agency… Usually, these commercial activities can be done independently by traders, but in the franchise operation, this independence cannot be found. Therefore, a franchise contract can be considered as a “bundle” of inseparable contracts, showing the nature of various types of licensing, technology transfer and agency contracts. This is a special feature of franchising activities in comparison with other types of commercial contracts of the same type.
Fourthly, in terms of subjects, the franchisor must have a system and business establishment that has a competitive advantage in the market. This business system must have sufficient market experience to create a reasonable “franchise” value and build trust in the franchisee. On the other hand, from a legal perspective, in order to meet the requirements of the law, the franchisee is an independent enterprise in terms of legal, financial and investment, and at the same time accepts risks for the capital invested in order to meet the requirements of the law in the franchisor’s franchise system. Many countries around the world, when stipulating the conditions to become parties to a franchise relationship, have high criteria that require both the franchisee and the franchisor to have the status of traders. This criterion proves that franchising is a typical activity of commerce, so it is almost exclusively for merchants.
Fifthly, regarding the object of franchising activities, the content of the concept of “commercial rights” has also developed very richly, including: consumer goods; business work; service; professional services; special services (under the Government); business methods. “Commercial rights” in franchising is an open concept, allowing the owners of the franchise relationship to specify each content included in it. “Commercial rights” may simply mean a trade secret, a trade name, a trademark, a certain production technology, or a combination of all rights over most subjects of property rights. intellectual property that the franchisor can use to create products or services that are similar to those created by the franchisor. However, the “synthetic”, “combination” nature of rights to objects of intellectual property is an indispensable element of “commercial rights”, making franchising activities possible. distinguishable relative to other similar commercial relationships.
Regulations on the rights of parties involved in franchising activities
Regarding the rights of the franchisor, according to Article 286 of the Commercial Law 2005, there are specific provisions as follows:
Unless otherwise agreed, franchisors have the following rights:
1. Receiving franchise money;
2. Organizing advertising for the franchise system and franchise network;
3. Periodically or irregularly inspect the franchisee’s operation in order to ensure the consistency of the franchise system and the stability of the quality of goods and services.
Regarding the rights of commercial franchisees, Article 288 of the Commercial Law 2005 specifically provides as follows:
– Unless otherwise agreed, franchisees have the following rights:
+ Request the franchisor to provide adequate technical assistance related to the franchising system;
+ Requiring franchisees to treat other franchisees equally in the franchise system.
Regulations on obligations of parties involved in franchising activities
Regarding the obligations of the franchisor, according to Article 287 of the 2005 Commercial Law, there are specific provisions as follows:
– Unless otherwise agreed, franchisors have the following obligations:
+ Provide guidance documents on the franchise system for franchisees;
+ Initial training and provision of regular technical assistance to franchisees to operate operations in accordance with the franchise system;
+ Design and arrange sales and service locations at the franchisee’s expense;
+ Guarantee the intellectual property rights to the objects stated in the franchise contract;
+ Equal treatment of franchisees in the franchise system.
Regarding the obligations of commercial franchisees, Article 289 of the Commercial Law 2005 specifically provides as follows:
– Unless otherwise agreed, franchisees have the following obligations:
+ Payment of franchise fees and other payments under the franchise contract;
+ Invest in sufficient facilities, financial resources and human resources to receive the rights and business know-how transferred by the franchisor;
+ Accept the franchisor’s control, supervision and guidance; comply with the requirements on design, arrangement of sales and service provision of franchisors;
+ Keep the franchised business secret secret, even after the franchise contract ends or terminates;
+ Stop using trademarks, trade names, business slogans, business logos and other intellectual property rights (if any) or the franchisor’s system upon termination or termination of the franchise contract;
+ Manage operations in accordance with the franchise system;
+ The franchise cannot be sub-licensed without the consent of the franchisor.
Above are the provisions of the Commercial Law 2005 related to commercial franchising activities.
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Frequently asked questions
1. The franchisee has the right to sublicense the franchise to a third party (referred to as the subfranchise) if it is approved by the franchisor.
2. The franchisee has the rights and obligations of the franchisee.
Before franchising, the intended franchisor must register with the Ministry of Trade.
The Government shall detail the conditions for doing business by mode of franchising and the order and procedures for franchise registration.
Franchise contract is an agreement between a franchisor and a franchisee, whereby the franchisor permits and requires the franchisee to conduct the purchase and sale of goods and provision of services on his own terms. after:
First, the purchase and sale of goods and provision of services shall be conducted according to the way of business organization prescribed by the franchisor and associated with the trademark, trade name, business secret, business slogan. franchise, business logo, advertisement of the franchisor.
Second, the franchisor has the right to control and assist the human rights party in running the business.
Conclusion: So the above is What is commercial franchising under Vietnam law?. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
