Conditions for implementing brand franchising today

Article overview

Brand franchising is an effective business strategy, bringing great benefits to both franchisors and franchisees. To successfully implement this model, the parties need to meet a number of important conditions. The article below will analyze in detail the legal conditions and franchise implementation process in Vietnam today.

Brand franchising conditions
Brand franchising conditions

What is a franchise?

Franchising is a form of business that allows the franchisee to use the franchisor’s brand, model and business system for a certain period of time at an agreed cost. According to Article 284 of the Law on Commercial 2005, commercial franchising is defined as a commercial activity, whereby the franchisor allows and requires the franchisee to personally conduct the purchase and sale of goods and provide services according to the terms of the contract conditions of the franchisor.

This form helps businesses expand their business networks quickly without investing too much capital. Franchisees benefit from the brand, experience and systems that have been built. In Vietnam, franchising is increasingly developing in many fields such as cuisine, retail, and education.

However, to successfully implement brand franchising, both the franchisor and the franchisee need to meet certain legal conditions according to Vietnamese law. Compliance with these regulations helps protect the interests of all parties and ensures business operations run smoothly.

Conditions for implementing commercial franchising

Conditions with the franchisor

According to the provisions of Article 5 of Decree No. 35/2006/ND-CP amended by Article 8 of Decree 08/2018/ND-CP, the franchisor only needs to meet the following conditions:

Traders are allowed to grant commercial rights when the business system intended to be used for franchising has been in operation for at least 1 year.

Conditions with the franchisor
Conditions with the franchisor

Conditions for franchisees

Currently, there is no law specifically regulating the conditions of franchisees. In general, the franchisee also needs to meet a number of conditions to participate in specific commercial activities as follows:

  • Have business registration appropriate to the field being franchised. This ensures the franchisee has legal status to engage in business activities.
  • Have enough financial capacity to carry out franchising. Franchisees need to demonstrate financial capacity to meet initial investment requirements and maintain business operations.
  • Have facilities that meet the franchisor’s requirements. This includes business location, equipment and other conditions as prescribed by the franchisor.
  • Does not violate the intellectual property rights or exclusive franchise rights of the franchisor. The franchisee needs to commit to complying with regulations on protecting the franchisor’s brand and intellectual property rights.
  • Meet other requirements of the franchisor regarding management capacity, personnel and other specific conditions depending on the business field.

Fully meeting these conditions not only helps the franchisee meet legal requirements but also increases the chance of success in operating the franchise business model.

Trademark registration procedures

Agency for registration of commercial franchising activities

The Ministry of Industry and Trade is the agency that registers commercial franchising activities in the following cases:

  • Commercial franchising from foreign countries into Vietnam, including commercial franchising activities from Export Processing Zones, Non-tariff Zones or separate customs areas as prescribed by Vietnamese law into Vietnamese territory;
  • Commercial franchising from Vietnam to foreign countries, including commercial franchising activities from Vietnamese territory into Export Processing Zones, Non-tariff Zones or separate customs areas according to the provisions of Vietnamese law.

Reference content: Section I Circular 09/2006/TT-BTM, Section a1 Point a Clause 1 Article 2 Circular 03/2024/TT-BCT, Point b Clause 1 Article 2 Circular 03/2024/TT-BCT.

Order and procedures for registering brand franchising

To carry out brand franchising, parties need to comply with the registration procedures prescribed by law:

Step 1: Prepare registration documents, franchise registration documents include:

  • Application for registration of commercial franchising activities according to form MD-1 in Appendix II issued with Circular 09/2006/TT-BTM, which changes the authority in the to section to the Ministry of Industry and Trade;
  • Introduction to commercial franchising according to the form in Appendix III issued with Circular 09/2006/TT-BTM;
  • A copy from the original book or a certified copy or a copy presented with the original for comparison of the Business Registration Certificate or Investment Certificate in case of commercial franchising from Vietnam to foreign countries; Individuals and organizations directly carrying out administrative procedures at agencies and organizations have the right to choose to submit one of the three forms of copy above;
  • Copy of Business Registration Certificate or equivalent document of foreign trader certified by the competent authority where the foreign trader is established in case of commercial franchise from abroad to Vietnam;
  • A copy from the original book or a certified copy or a copy presented with the original to compare the industrial property rights protection certificate in Vietnam or abroad in case of transfer of rights to use objects industrial property has been granted a protection certificate;
  • Documents proving the original franchisor’s approval to sub-franchise in case the trader registers franchising activities as a secondary franchisor;

Step 2: Submit application:

Enterprises submit applications to the Ministry of Industry and Trade.

Step 3: Processing documents:

  • When receiving applications for registration of commercial franchising activities, the registration agency must record a receipt. The document receipt is made in 03 copies according to form TB-1A, TB-1B in Appendix II issued with Circular 09/2006/TT-BTM, 01 copy is given to traders registering franchise activities commercial and 02 records at the registration agency;
  • For incomplete and invalid documents, within a maximum of 02 working days from the date of receipt, the registration agency must notify in writing, according to forms TB-2A, TB-2B in the Appendix. II issued together with Circular 09/2006/TT-BTM, for traders to submit dossiers to request additional and complete dossiers. The time limit for processing documents is calculated from the time the trader registers for franchising activities and completes additional documents;
  • Traders registering for commercial franchising activities have the right to request the registration agency to clearly explain the additional requirements and complete the dossier. The registration agency is responsible for responding to that request from the trader.

Step 4: Get results:

  • Within 05 working days from the date of receipt of complete and valid documents, the registration agency is responsible for registering the trader’s franchise activities in the Franchise Activity Register;
  • In case of refusal to register commercial franchising activities, within 05 working days from the date of receipt of complete and valid documents, the registration agency must notify in writing clearly stating the reason for refusal.

Complying with this registration process helps ensure the legality of franchise activities, protects the rights of all parties and creates favorable conditions for business expansion.

Reference content: Section II Circular 09/2006/TT-BTM.

Conditions for franchisees
Conditions for franchisees

Prestigious brand franchising consulting and support services at Long Phan

Brand franchising is not only an opportunity to expand the market, but also brings significant economic benefits to both the franchisor and the franchisee. With a team of experienced experts, Long Phan is committed to providing consulting services on brand franchising to help customers save time, costs and minimize legal risks during the franchising process.

The services we provide include:

  • Consulting on building franchise strategies, supporting customers in reviewing conditions with the franchisor.
  • Support drafting franchise contracts in accordance with the law.
  • Representing customers to carry out procedures to register franchising activities with state agencies.
  • Consulting on resolving disputes related to commercial franchising.

Brand franchising brings many benefits to both the franchisor and the franchisee, helping to expand the business quickly. However, to implement successfully, the parties need to comply with the law and fully meet the necessary conditions. Customers who need detailed consulting support on the brand franchising process, please contact Long Phan via the hotline: 0906735386 for dedicated support.