REGISTRATION OF FRANCHISING ACTIVITIES IN VIETNAM

Currently, according to the strong growth of the economy, franchising is one of the most popular and developed business methods in the Vietnamese market. This is a business model that helps increase the enterprise’s coverage with the lowest cost and risk, and simultaneously guarantees a stable profit from the use of brand value. Therefore, more and more Vietnamese enterprises are being proactive in seeking new business opportunities through franchising with famous brands. Recognizing the needs of enterprises regarding this issue, NPLaw would like to guide in detail the procedure for franchise registry in the following article.

I. Cases requiring the franchise registry

According to the applicable Law, not all franchising activities are required to implement procedures for franchise registry. Decree No. 35/2002/ND-CP and Decree No. 120/2011/ND-CP stipulated mandatory and optional cases for implementing the franchise registry procedure. Therefore, when conducting franchise activities, in which cases are you forced to implement franchise registry activities?

Pursuant to Article 17, Article 18 of Decree No. 35/2006/ND-CP (amended and supplemented as prescribed by Clauses 2 and 3, Article 3 of Decree No. 120/2011/ND-CP), only one case has to implement registration of franchising activities. That is:

• Franchising from abroad into Vietnam, including franchising activities from the Export processing zone, Non-tariff zone, or specific tariff zones as defined by Vietnamese Law when entering Vietnam.

Besides, the Law also specifically stipulates for cases that are forced to implement the franchise registry:

• Domestic franchising
• Franchising from Vietnam into a foreign country

However, in cases where businesses don’t have to register for the franchise listed above, they shall implement a reporting regime to the Department of Industry and Trade.

II. Conditions for the franchise registry

For franchising activities to be successful, it is necessary to consider many different elements. However, in terms of the legal aspect, the enterprise needs to satisfy the following three conditions fully:

•  Having an Enterprise Registration;
•  Guaranteeing full for Food Hygiene and Safety conditions;
•  Registered Brand and granted Protection Title. 

Accordingly, when a franchise doesn't find difficulty, it must satisfy all three conditions listed; and if even one of these factors is missing, the legal risk encountered is great. Specifically:

• It doesn't have Enterprise Registration for inappropriate businesses. If a business is successful and profitable, but operates as a Business Household, Sole Proprietorship or Partnership, it shall be limited to business expansion and capital contribution.
• If the enterprise doesn’t have full Food Hygiene and Safety conditions, it is difficult to convince partners that the manufacturing process is guaranteed and certified by State Agencies (SA). Besides, guaranteeing this condition is not only mandatory but also significantly impacts the business's reputation and brand.
• A brand registration is the most important issue when implementing franchises. Many enterprises, and franchisees find the following faulty:

A brand registration is untimely: An untimely brand registration can result in the brand being registered before or just stopping at the filing of a declaration of Protection Title. In essence, therefore, when the certificate has not been granted (after 18 to 24 months of filing the application), the individual’s ownership of the trademark has not been recognized by the State. If the individual doesn't have ownership, such individual will not have the right to dispose of or use it.

The brand registration is slow to lose brands: Vietnam follows the “First to file” system (prior submission for priority). Therefore, if the submission of the registration application is late, it will result in the enterprise not owning the trademark intended to be franchised, but being forced to repurchase or build a new one.  

III. Regulations on franchise registry procedures

Before commencing franchising activities, if an enterprise intends to franchising, including initial franchise and secondary franchise, such enterprise shall implement a procedure for registering franchising activities with the competent state agency as defined by Article 20 of Decree No. 15/VBHN-BCT on 4/25/2014, and according to the guidance in Circular 12/VBHN-BCT 2016.

Documents for the registration of franchising activities will include:

• Application for franchising activities;
• Demonstration for franchising;
• Copy of Business Registration Certificate or Investment Certificate in case of franchising from Vietnam to abroad, copy of Business Registration Certificate or equivalent document of the foreign trader certified by the competent authority where the foreign trader is established in case of franchising from abroad into Vietnam;

A copy from the original register, a certified copy, or a copy presented with the original for comparison

• Protection title of industrial property rights in Vietnam or abroad in case there is a transfer of the use right for industrial property objects that have been granted Protection Title;

 A copy from the original register, a certified copy, or a copy presented with the original for comparison

• Documents proving the initial franchisor’s consent for sub-franchising in case the trader who registers for the franchise is a secondary franchisor.

Process of registration of franchising activities:

• For incomplete and invalid dossiers, within a maximum of two (02) working days from the date of receiving dossiers, the registry shall notice in writing requesting the trader to supplement and complete the dossiers;
• For complete and valid dossiers, within five (05) working days from the date of receiving fully valid dossiers, the registry is responsible for registering the trader’s franchising activities in the register of franchising activities and notifying the trader;

In case of a refusal to register, the registry shall notice in writing, clearly stating the reasons for the refusal.

The above information are some important notes related to the implementation of the franchise registry as defined by the applicable Law. NPLaw with our professional Lawyers and Specialists shall help Enterprises implement investment registration procedures in the shortest time and simultaneously always provide to absolutely solve the arising problems.
If the clients need consultancy and more understanding about relevant information, please do not hesitate to contact us and send an email to the address: legal@nplaw.vn or directly contact us via phone: 0913.449.968, and NPLaw shall contact you as soon as required.

CÔNG TY LUẬT TNHH NGỌC PHÚ

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Email: legal@nplaw.vn