Comprehensive Guide to Franchising

Article overview

Franchising is a powerful business strategy, helping businesses expand their scale quickly and effectively. Through this model, brands can take advantage of franchise partners’ capital and local market understanding, minimize risks and optimize costs. At the same time, franchise investors have access to a brand that has a solid foothold, thereby increasing their chances of business success.

Comprehensive guide to franchising
Comprehensive guide to franchising

Forms of franchising

According to current regulations, there are 03 common forms of commercial franchising, each form has different characteristics and scope of application. Specifically as follows:

Product/service brand franchising:

  • In this form, the franchisee is allowed to use the brand to distribute products or provide services. This is a popular form of franchising in the food and beverage industry. For example, KFC and Pizza Hut stores, where the franchisee sells products according to the brand’s standards and recipes.
  • The outstanding feature is that the right to control product quality belongs to the franchisor, to ensure brand consistency.

Franchise trade name:

  • The franchisee uses the trade name and trademark of the original brand to expand the business network, but with a lower level of intervention from the franchisor in the operating process. For example, 7-Eleven and Circle K stores operate under a common brand name but have greater independence.
  • This is a suitable model for businesses that want to take advantage of brand recognition but still maintain a level of autonomy in business operations.

Production franchise:

  • The franchisee is allowed to use the brand’s processes, formulas, and manufacturing know-how to manufacture products and distribute them under that brand name. For example, the production of soft drinks according to the formula of brands such as Number 1 Beverage Company.
  • Suitable for the manufacturing industry, helping to expand production scale while still retaining technological know-how.

Note when implementing franchising

Legal conditions are a mandatory factor to protect the rights of both the franchisor and the franchisee, as well as ensure the legality of franchising activities in Vietnam. Specific conditions include:

Legal business registration:

  • Enterprises participating in franchising need to have a legal business registration license in Vietnam or another country if they are foreign franchisors. This is to confirm the legitimacy of the trader in commercial activities.

Ensuring food safety and hygiene:

  • For brands operating in the food sector, food safety regulations are mandatory to protect consumers and maintain brand reputation. Failure to meet food safety standards can affect the brand’s image and legal rights.

Register for trademark protection:

  • To proceed with franchising, the trademark must be registered and a certificate of protection granted. Vietnam applies the principle of “First to file” (filing first gets priority), so trademark protection registration needs to be done early to avoid being pre-registered by a third party.
Conditions when implementing commercial franchising
Conditions when implementing commercial franchising

Procedures when implementing commercial franchising activities

The franchising process requires preparation of complete documents and implementation of prescribed procedures to ensure the legality of the agreement between the parties.

Prepare documents

Dossier for registration of commercial franchising includes:

  • Franchise registration application (Form MD-1 according to Circular 09/2006/TT-BTM): This application must be filled out completely and accurately with information about the parties involved, the scope and conditions of the franchise.
  • Franchise introduction: Provides detailed information about the brand, system, requirements and rights of the franchisee as prescribed in Appendix III 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; 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.

Execution order

The process of submitting commercial franchise documents needs to comply with the steps according to Article 20 of Decree 35/2006/ND-CP:

Step 1: The franchisor submits an application for registration of franchise activities to the Ministry of Industry and Trade.

Step 2: The receiving agency will review the application within 5 working days. If the application is valid, the agency will register it in the Commercial Franchise Register and notify the registrant in writing.

In case the dossier is incomplete or invalid, within 02 working days from the date of receipt of the dossier, the competent state agency must notify the proposed franchisor in writing to supplement, complete profile;

Step 3: After completing the process, if the application meets the requirements, the franchisor will be granted a license to register a commercial franchise. If refused, the agency will send a document stating the reason.

Procedures when implementing commercial franchising activities
Procedures when implementing commercial franchising activities

Comprehensive consulting and guidance services on commercial franchising at Long Phan

Long Phan provides comprehensive consulting and guidance services on franchising, supporting businesses in ensuring all legal aspects, from preparing documents to completing franchise registration procedures. With practical experience and extensive knowledge, Long Phan is ready to accompany and support customers in the process of expanding their brands through franchising. Services include:

  • Detailed legal advice: Clearly explain the conditions and legal requirements related to franchising.
  • Prepare complete documents: Ensure documents are prepared accurately and comply with regulations.
  • Representing businesses in working with authorities.
  • The representative explains the documents to the competent authority when requested.
  • Receive results and hand them over to customers.
  • Consulting on issues arising after franchising.

For detailed advice and support on the franchising process in Vietnam, please contact Long Phan via the hotline 0906735386. We are ready to accompany customers in every step, helping to complete franchising procedures quickly and in legal compliance.