Thailand: Draft Franchising Business Law in Thailand

Franchising has become a successful business model globally, and Thailand has been no exception. According to information from the Franchise & Thai SMEs Business Association, there are approximately 400 Thai franchisors seeking franchisees for businesses ranging from restaurants to daycares and from tutoring institutions to convenience stores. Currently, there are over 10,000 franchisees in Thailand. Franchising businesses are rapidly expanding, yet Thailand still lacks a specific regulatory law to govern such businesses. This is surprising, as a draft of the Franchising Business Act was first released to the public in 2006, but not until recently has it returned to public attention. A public hearing, organized by the Ministry of Commerce, was held in March 2011.

The Need for a Franchising Business Act

The draft Franchising Business Act has four main objectives:

  1. To stipulate the criteria and reasons for providing regulations in relation to franchises;
  2. To appoint a committee to be responsible for providing franchise business support and to submit promotion and development plans to the Minister of Commerce, as well as to consider complaints;
  3. To stipulate protective measures aimed at protecting franchisors and franchisees, such as measures to prevent any exaggerated advertisements and to ensure the fairness of contracts, the availability of clear business operating manuals, and the disclosure of sufficient data to facilitate decision making relating to the purchase of franchises; and
  4. To stipulate criminal and administrative penalties to be imposed for breach of the law.

Important Impacts

In the pending bill, the two most important issues affecting franchisor practice are provided in Chapter 3 (Sections 18-32), which focuses on restrictions of a franchise business operation, and Chapter 4 (Sections 33-50), which discusses registration of a franchise business operation.

Restrictions. Franchisors and franchisees will be required to comply with certain restrictions on business operations. For example, franchisors will be duty bound to disclose data necessary for the franchise business operation. Furthermore, franchise business agreements must be in writing and must specify the details required by law. Failure to comply with these requirements would void the agreement between the franchisor and the franchisee.

In addition, the draft law states that franchisors must provide clear working manuals for franchisees to follow. If the agreement places territorial limits on the right to operate a franchise business, franchisors must not operate franchise businesses, or similar businesses, in these territories.

However, franchisors are also protected. For example, franchisees are prohibited from disclosing data relating to business operations that have been disclosed by franchisors.

Registration. If the draft law is approved, any franchisor who wishes to offer a franchising business to franchisees in the future must register such business operation with the Thai Ministry of Commerce. All prospective applicants must possess the qualifications as required by law.

The Registrar must evaluate the accuracy of (i) applications for registration, (ii) draft franchise business operation agreements, (iii) the existence of working manuals, and (iv) business plans that would be used in the promotion and control of the franchise business operation.

Another particularly noteworthy qualification is that the franchisor is required to have operated the franchise business for at least two years. The business must have at least two branches that have recorded profits for at least two consecutive accounting years, prior to the date of filing the franchise business registration application, and evidence of such profits should be submitted as required.

Finally, if the business operators fail to comply with such agreements during operations or are otherwise disqualified, the Committee for the Consideration of Administrative Punishment is empowered to issue franchise revocation orders. Upon the revocation of a franchise, relevant solicitation or advertisements can no longer be made and no rights to operate new franchise businesses will be granted.

Intellectual Property Issues

Under the draft law, a franchise business must include with some form of intellectual property. The draft law provides that the definition of a franchise means a business operation whereby a franchisor agrees to allow the franchisee to operate a business by using the franchisor's forms, systems, procedures, and intellectual property rights, or the ones which the franchisor has the right to allow another person to use for the purpose of operating a business, within a specified period of time or a specified area. This business operation is promoted and controlled under the franchisor's business operation plan, and the franchisee has the duty to pay remuneration to the franchisor.

Furthermore, Section 25 of the draft states that if the provisions of other laws require registration in order to grant the exercise of intellectual property rights by a third party, the franchisor shall have the duty to duly register the granting of these rights, as required by such other laws.

Scope of Enforcement

It is important to note that, as provided under Section 3, this draft law shall not be applicable to franchise businesses whose franchisors are domiciled, and who have entered into a relevant contract, outside the Kingdom. For example, a franchise agreement between a foreign franchisor and a Thai franchisee will not be subject to restrictions under this law.

However, if a foreign franchisor grants a master franchising agreement to a Thai franchisee allowing the Thai franchisee to grant a sub-franchising agreement to other Thai entrepreneurs, the draft law will not be applicable to the master franchising agreement, but will have enforcement effect against sub-franchising agreements between the master franchisee and the sub-franchisee.

Many practice standards that are laid out in the draft law are controversial, and will be subject to further review and discussions. However, given that many business operators stand to be potentially affected, the new law will undoubtedly be subjected to further intense scrutiny before its final enactment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions