29 April 2024

Legal Framework For Franchising In Vietnam

Russin & Vecchi


Russin & Vecchi was founded in Asia over 60 years ago. We have offices in Ho Chi Minh City and Hanoi. We work with global clients and with international law firms. From entry strategy to operations, we help clients navigate the complex and changing Vietnamese regulatory framework. We deliver creative, compliant, and practical solutions.
Vietnamese franchise law applies to franchising activities between Vietnamese parties, to a foreign franchisor who grants a franchise to a franchisee in Vietnam...
Vietnam Corporate/Commercial Law
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Franchising began to bloom in Vietnam from 2009, when the country eased restrictions in the retail market to fulfill its WTO commitments. Since then, the franchise business model has developed quickly. Today, many famous foreign brands reach Vietnamese customers through franchise networks. The common trend has been to receive franchises from foreign franchisors, but several well-known Vietnamese brands are franchised within Vietnam and abroad.

In fact, franchising is well suited to Vietnam, where there is a strong culture of entrepreneurship. It is a good method for small and medium size entrepreneurs who want to start a new business in a short period of time. However, more and more, franchising is the business of large local and foreign sub-franchisors. Franchises, in comparison to new businesses, have a more limited risk, a modest amount of invested capital, and a proven track record of success. Franchising continues to grow rapidly in Vietnam, not only in the fast food and beverage business, but also in other sectors. A strong surge of interest in franchised businesses exists among local entrepreneurs, and interest from franchisors has also grown.


  1. International practices

Although it originated centuries ago, franchising first became popular as a business form in the United States in the 1950s, when the U.S. constructed an interstate highway system. As the highway system allowed the American public to travel away from home to unfamiliar areas, consumers sought out businesses with familiar names, products and services.

Some countries have specific franchising legislation while others do not. The United States has well-developed laws on franchising, which can provide some insights and guidance about the business model. In the United States, franchising is governed by laws that require franchisors to inform prospective franchisees in some detail about the system, the risks, and their obligations.

In the US, this required information is contained in a document called the Franchise Disclosure Document ("FDD"). Under federal and state rules, a franchisor cannot offer a franchise until the franchisor has disclosed specific information about the franchise. For example, the franchisor is required to disclose its business experience and past or pending litigation, the franchise fee and initial investment, any restrictions on sources of supplies, and much more.

The FDD or its equivalent has been adopted in many other countries. Vietnam has adapted the FDD. In some countries, once the FDD has been issued, the government does not intervene and the parties are free to negotiate and enter into a franchise agreement. In others such as Vietnam, however, the FDD must be filed or registered with the authorities before an offer is made to a potential franchisee. For ease of reference, the Appendix presents the FDD as used in Vietnam, in laymen's language.

  1. Franchises as regulated by Vietnamese law

Vietnamese franchise law

The basic regulations on franchising are provided in the Commercial Law, adopted by the National Assembly on 14 June 2005 ("Commercial Law"). These regulations are elaborated upon in Decree No. 35/2006/ND-CP of the Government (31 March 2006) ("Decree 35") as amended by Decree No. 120/2011/ND-CP (16 December 2011) ("Decree 120") and Decree No. 08/2018/ND-CP (15 January 2018) ("Decree 08") of the Government, and Circular No. 09/2006/TT-BTM of the Ministry of Industry and Trade (25 May 2006) ("Circular 09") as amended by Circular No. 04/2016/TT-BCT of the Ministry of Industry and Trade ("MOIT") ("Circular 04"). Regulations related to franchising can also be found in the Law on Intellectual Property, adopted by the National Assembly on 29 November 2005 (as amended in 2019 and 2022), and the Law on Technology Transfer, adopted on 19 June 2017 (as amended in 2023).

Vietnamese franchise law applies to franchising activities between Vietnamese parties, to a foreign franchisor who grants a franchise to a franchisee in Vietnam, and to a Vietnamese franchisor who grants a franchise to a franchisee in a foreign country.

Definition of franchise

The Commercial Law defines franchising as a commercial arrangement under which a party (the franchisor) grants another party (the franchisee) the right to carry out the business of selling its goods or supplying services under the following conditions:

  • the franchisee may carry out the business under a format determined by the franchisor, and may affix the franchisor's trademarks, trade names, business logos, slogans, and advertisements at the franchisee's business premises; and
  • the franchisor has the right to control and assist the franchisee to carry out the franchised business.

Decree 35 gives a rather comprehensive interpretation of franchising. It includes:

  • rights received by the franchisee from the franchisor to carry out a business under a system determined by the franchisor and to affix the franchisor's trademarks, trade names, business logos, slogans, and advertisements at the franchisee's business premises;
  • rights received by a primary franchisee from a franchisor under a master franchise agreement;
  • rights received by a sub-franchisee from a sub-franchisor (ie, the primary franchisee) under a master franchise agreement; and/or
  • rights received by a franchisee from a franchisor under a franchise development contract, which allow a franchisee to carry out the franchised business at more than one location.

Master franchise

In a master franchise, in addition to the franchise arrangement, the master franchisor gives the franchisee the right to act as a sub-franchisor and the right to grant a franchise to a sub-franchisee. When we refer to a foreign franchisor in this article, we intend to include a foreign entity that has been awarded a master right to sub-franchise a business in Vietnam.

Decree 35 regulates master franchises. A particular condition for a sub-franchise arrangement under a master franchise is that the local franchisee that receives a franchise from abroad cannot sub-franchise to a sub-franchisee unless "the business to be franchised has already been run for at least one year." This restriction is intended to ensure the sustainable development of a franchising network. The policy rationale is that the business to be franchised should be stable before it is franchised to others.

Franchise Agreement

In Vietnam, a franchise agreement must be in writing. A franchise agreement need not be registered to be effective. However, franchises from overseas, from an export processing zone, a non-tariff area, or a separate customs area need to be registered with the Ministry of Industry and Trade ("MOIT") before becoming active.

The regulatory authorities of franchising activities

The MOIT is the central regulatory authority for franchising activities. The MOIT provides guidance for implementation of policies and legislation on franchising and to organize the registration of franchises.

The MOIT receives dossiers to register franchises from overseas, an export processing zone, a non-tariff area, or a separate customs area. The Departments of Industry and Trade ("DOITs") are the provincial agencies of the MOIT. The DOITs supervise franchising in provinces and centrally-run cities. The DOITs also receive reports submitted by Vietnamese franchisors who franchise their business to Vietnamese or to foreign franchisees.

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* The current version of this paper on franchising was prepared by and is updated by lawyers from Russin & Vecchi. This version is current through April 2024.

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.

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