Vietnam – New Franchising Law

The new commercial law enacted by the Vietnamese national assembly on June 14, 2005 is a major breakthrough in the field of franchising. The new statute came into force on January 1, 2006 in order to comply with international legal norms following accession to the WTO. The new law now provides a legal framework that will govern franchising activities in Vietnam and is designed to eliminate the overlap and uncertainty of the prior commercial statute insofar as it concerned franchising activity.

Under the new law, a franchisee has the right to carry out its business under the franchisor’s trademark and related intellectual property. A franchisor is entitled to royalty payments from the franchisee to the extent provided for in the franchise agreement. The new law also requires the franchisor to be the owner of a lawfully organized business that is in operation for at least two years to be entitled to grant the franchise. Finally, the new law requires compliance with the terms and conditions of the agreement for a minimum period of five years, after which the royalties and renewal period shall again be negotiable between the parties.

The franchise agreement must be in writing and registered with the Provincial Department of Trade in the location of the franchisee. Regardless of whether any of the parties are Vietnamese persons or entities, the agreement must be registered with the Ministry of Trade.