Franchise contracts: Content and important notes

Franchise contracts are agreements between the franchisor and the franchisee in which the franchisor grants the franchisee the right to purchase and sell goods or provide services according to a set process. Like other types of contracts, franchise contracts have specific characteristics and regulations that must be complied with. The article below will help customers better understand the content and important notes when drawing up a franchise contract.

What is a franchise contract?

A franchise contract is an agreement between the franchisor and the franchisee, whereby the franchisor allows and requires the franchisee to purchase and sell goods or provide services according to a predetermined system and method.

This is clearly stipulated in Article 284 of the Law on Commercial 2005, which clearly defines franchise activities including the use of trademarks, trade names, business secrets, and other elements of the franchisor.

Content of franchise contract

According to Article 11 of Decree 35/2006/ND-CP, a commercial franchise contract must have the following main contents:

• Content of commercial rights: The franchisor must grant the franchisee the right to use the trademark, business secrets and related elements.
• Rights and obligations of the franchisor: Includes providing instructional materials, training, and technical support to the franchisee.
• Rights and obligations of the franchisee: The franchisee must comply with business regulations, maintain the system and protect business secrets.
• Franchise fee and payment method: The parties will agree on the franchise fee, periodic fees and payment method.
• Contract term and conditions for extension: It is necessary to clearly define the effective term of the contract, conditions for extension and method of terminating the contract when necessary.
• Dispute resolution: It is necessary to clearly stipulate the dispute resolution mechanism between the parties in case of disagreement.

Current franchise contract sample

Currently, Vietnamese law does not regulate a specific franchise contract form. However, based on Article 11 of Decree 35/2006/ND-CP, a franchise contract may have main contents such as commercial rights, obligations of the parties, franchise fees, contract term, and dispute resolution methods. The parties can refer to the following franchise contract samples:

>>>Reference: Sample franchise contract.

Things to note when drafting franchise contracts

When drafting a franchise contract, customers need to pay attention to the following issues:

• Contract language: According to Article 12 of Decree 35/2006/ND-CP, commercial franchise contracts must be drawn up in Vietnamese, except in the case of franchise contracts abroad.
• Contract term: The contract term can be agreed between the parties but must ensure practicality and suitability for the purpose of the franchise.
• Rights and obligations of the parties: The rights and obligations of the franchisor and franchisee need to be clearly stipulated to avoid future disputes.
• Contract termination clause: This clause must clearly define the cases in which one of the parties has the right to terminate the contract ahead of time, as well as the resolution process when the contract is terminated.
• Regulation of franchise fees and payment methods: Franchise fees need to be specifically determined and payment methods must be clear.
• Intellectual property rights and transfer of usage rights: Rights and obligations related to trademarks, trade names, and business secrets need to be clearly defined.
• Confidentiality of information and business secrets: Confidentiality provisions need to be stipulated to protect information and documents related to the franchise system.

Instructions for drafting franchise contracts at Long Phan

Long Phan provides consulting services and drafts professional franchise contracts, ensuring compliance with Vietnamese law. Long Phan’s full service includes:

• Consulting on regulations related to commercial franchising.
• Support customers in drafting franchise contracts according to regulations.
• Consulting on necessary elements when implementing commercial franchising in Vietnam and internationally.
• Support you in the process of negotiating contract terms with the franchisor or franchisee.
• Support checking and reviewing drafted franchise contracts to ensure legality and completeness of necessary legal elements.
• Support the assessment of risks that may occur in the contract and propose preventive measures.

Franchise contracts are an important factor in business development through the franchise model in Vietnam. Establishing a franchise contract needs to comply with strict legal regulations to protect the rights of both parties. If customers need advice or support in drafting a franchise contract, please contact the hotline 0906735386 for detailed advice and timely support.