Conditions for franchising

I have a seafood trading company in Da Nang. I want to expand our business by opening some stores in the form of franchises. I would like to know the conditions and procedures for franchising. Thank you.

FDVN Opinions:

1. For franchisors:

According to Clause 1, Article 5 of Decree No. 35/2006/NĐ-CP dated March 31, 2006 of Government detailing implementation of Commercial Law 2005 regarding franchising (amended and supplemented by Decree No. 08/2018/ND-CP dated January 15, 2018 of the Government), the conditions for the franchisor are as follows: “The franchisor shall be entitled to franchise a business if it has been operating for at least 1 year”.

The term of 01 years under this regulation is counted from the date of granting the business license of the first store’s location in the trader’s business system, not from the date of granting the enterprise registration certificate.

2. Franchise registration:

According to Clause 1 of Article 291 of Commercial Law 2005, before conducting franchising activities, Vietnamese traders or foreign traders that intend to franchise must register franchising with the Ministry of Trade.

According to Clause 1 of Article 17 of Decree No. 35/2006/NĐ-CP dated March 31, 2006, of Government detailing the implementation of Commercial Law 2005 regarding franchising (supplemented by Clause 2, Article 3 of Decree No. 120/2011/ND-CP of the Government), in the following cases, registration of commercial franchising is not required:

a/ Domestic commercial franchising;

b/ Vietnam-to-overseas commercial franchising.

Apart from the above two cases, before conducting commercial franchising activities, foreign traders franchise into Vietnam, including franchising activities from export processing zones, non-tariff zones, or other commercial zones to Vietnamese territory under the provisions of Vietnamese law, they must register their franchising activities with the Ministry of Industry and Trade.

Your case falls into domestic franchising or commercial franchising from Vietnam to abroad. Therefore, you are not required to register for commercial franchising under the law. However, you are required to make periodical reports to the Department of Industry and Trade no later than January 15 of each year according to the form in Part B, Appendix III of Circular No. 09/2006/TT-BTM.

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