Vietnam Franchise Law: Legal Requirements for Foreign Franchisors

Introduction

Vietnam's growing middle class and consumer market make it an attractive destination for international franchises. However, the legal framework for franchising has specific requirements that foreign franchisors must understand before entering the market.

Legal Framework

Franchising in Vietnam is governed by:

Commercial Law 2005 (Articles 284-291)Decree 35/2006/ND-CP (as amended by Decree 08/2018/ND-CP)Circular 09/2006/TT-BTM

Registration Requirements

Who must register?

All franchise systems operating in Vietnam must be registered with the Ministry of Industry and Trade (MOIT).

Registration documents

Application form (prescribed format)Franchise Disclosure Document (FDD) — in VietnameseSample franchise agreement — in VietnameseFranchisor's certificate of incorporationFinancial statements (audited, last 2 years)Proof the franchise system has operated for at least 1 year

Processing time

5 working days for complete applicationsRegistration is valid indefinitely (but must notify changes)

Franchise Disclosure Document (FDD)

The FDD must include:

Company information and business historyFinancial condition of the franchisorIntellectual property details (trademarks, patents)Franchise fees and ongoing royaltiesTerritory rights and restrictionsTraining and support providedTermination and renewal conditionsList of current franchiseesAudited financial statements

Timeline: The FDD must be provided to the franchisee at least 15 working days before signing the franchise agreement.

Key Franchise Agreement Terms

Mandatory provisions

Duration (minimum not specified, but typically 5-10 years)Territory definitionFee structure (initial fee + ongoing royalties)IP license termsQuality control standardsTraining obligationsTermination conditionsDispute resolution mechanism

Common structures

Master Franchise: Foreign franchisor grants rights to a Vietnamese master franchiseeDirect Franchise: Foreign franchisor directly franchises to individual operatorsArea Development: Franchisee commits to opening multiple units in a territory

Intellectual Property Protection

Before entering Vietnam

Register your trademark with the National Office of IP (NOIP)Conduct a trademark search to check for conflictsRegister domain names (.vn)

In the franchise agreement

Clear IP license termsQuality control provisionsPost-termination IP restrictionsAnti-counterfeiting commitments

Tax Considerations

Franchise fees are subject to 10% withholding taxRoyalties subject to 10% withholding taxVAT may apply to certain servicesTransfer pricing rules apply to related-party transactions

Common Challenges

Finding reliable franchisees: Due diligence is essentialProtecting brand standards: Regular audits and trainingCurrency controls: Repatriation of franchise feesLegal enforcement: Termination can be difficult under Vietnamese lawConsumer preferences: Adapting menus/products to local tastes

Conclusion

Vietnam offers significant franchise opportunities, but success requires careful legal planning. A well-structured franchise agreement and proper IP protection are essential foundations.

Contact Attorney Vo Thien Hien at Apolo Lawyers for expert franchise law advisory in Vietnam.