Franchising In Vietnam – A Brief Overview
Oct 25, 2013
Vietnam has emerged as a key potential market for international franchises and global brands. Rapid economic growth, a rise in disposable income, large population, and rising domestic consumption, among other things, have all contributed to making Vietnam an increasingly attractive place for franchising to thrive.
The first foreign franchisors, such as Jollibee, KFC and Lotteria entered the Vietnamese market in the late 1990s. Since then, a variety of other famous international brands have been franchised on a large scale basis throughout Vietnam, including, Gloria Jeans, Bread Talk, and Subway.
Many Vietnamese brands, such as Pho 24, Wrap & Roll and Trung Nguyen Coffee have also successfully franchised and are ubiquitous throughout the country. As such, the trend indicates that further high profile brands will soon be entering and expanding in the Vietnamese market.
The laws relating to franchising in Vietnam have been officially in force under the Law on Commerce which took effect as of 01 January 2006. Subsequently, Decree 35/2006/ND-CP dated 31 March 2006 as amended by Decree 120/2011/ND-CP dated 16 December 2011 and Circular No. 09/2006/TT-BTM were issued to complete the legal framework for franchising activities. The above-described legal framework applies to foreign franchisors who grant franchises to franchisees in Vietnam.
Pursuant to these laws, both franchisors and franchisees must satisfy certain conditions to be eligible for granting or receiving a franchise in Vietnam. The key eligibility requirements are as follows:
(i) The business system intended for franchise has been in operation for at least one year. Where a Vietnamese trader is the primary franchisee of a foreign franchisor, such Vietnamese trader must conduct business by mode of franchising for at least one year in Vietnam before sub-franchising;
(ii) The goods/services subject to the franchise must not be those in which business is prohibited, restricted, and subject to further conditions; and
(iii) A trader shall be permitted to receive commercial rights when having the registration of business lines subject to commercial rights.
Furthermore, any franchise agreement must be in writing. The Ministry of Industry and Trade, which is the primary regulatory authority regarding franchise activities, must approve franchising from overseas into Vietnam.
With this legal framework firmly in place, the popularity of franchising in Vietnam is likely to increase. Franchising is also well-suited to entrepreneurs, of which Vietnam has many. Moreover, franchising can be implemented in a wide variety of sectors, from food and beverage to services such as logistics and more. As such, franchising is an excellent investment vehicle for both foreign investors and local business people.