In order to shorten the investment time, save costs, avoid the collision of legal procedures on inspection, approved at the establishment stage, investors can choose to develop their business based on the existing platform through the form of franchising. So, what is a commercial franchise according to Vietnam’s regulations?
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In order to shorten the investment time, save costs, avoid the collision of legal procedures on inspection, approved at the establishment stage, investors can choose to develop their business based on the existing platform through the form of franchising. So, what is a commercial franchise according to Vietnam’s regulations?
1. Definition of “commercial franchise”
According to Article 284 of the Law on Commercial 2005 of Vietnam, 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 certain conditions.
Specifically, the franchisor will transfer technology, trademarks or other objects of intellectual property rights to the franchisees. The franchisee will base on the transferred technology, trademarks, etc. to conduct business activities.
2. Conditions for commercial franchise
According to the Decree No. 35/2006/NĐ-CP amended by Decree No. 08/2018/NĐ-CP of Vietnam’s Government, conditions for commercial franchise are specified as follows:
Conditions for commercial franchise
- 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.
Conditions applied to franchisors
The franchisor shall be entitled to franchise a business if it has been operating for at least 1 year.
3. Procedures and order for registration of franchising
Not all cases of franchising must be registered, cases where franchising is not required include:
- Domestic franchising;
- Franchisings from Vietnam to overseas.
In these cases, organizations and individuals are not required to register for franchising but must report to the Department of Industry and Trade.
Thus, in case of franchisings from Vietnam to overseas, registration must be done with the competent authority. Procedures for registration of franchisings from Vietnam to overseas are conducted according to Articles 19 and 20 of Decree No. 35/2006/NĐ-CP guided by Clauses 2, 3 and 4 Section 2 of Circular No. 09/2006/TT-BTM as follows:
- A dossier of application for registration of franchising comprises:
+ An application for registration of franchising;
+ A written introduction of franchising;
+ A copy of the foreign trader's business registration certificate or paper of equivalent validity, certified by a competent agency of the place where the foreign trader is set up (has been consular legalized);
+ A notarized copy of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted (has been consular legalized);
+ Papers proving the approval of the primary franchisor's permission of franchise in case the trader registering franchising is the secondary franchisor;
+ Authorization letter of franchisor for individual/organization to act on behalf of the intended franchisor to carry out procedures related to franchise registration (has been consular legalized) in case the intended franchisor does not directly carry out these procedures.
- Franchise registration process:
The choice of franchising method to conduct business areas for creating a certain foundation and reputation is an effective solution to save time, costs, and more importantly, limit risks and failures when starting over from scratch. We hope that the above advice on franchising activities can help our Customers and Members make effective investment decisions.
Thuy Tram
