작성일자: 2014.12.15

작성자: 하노이 무역관 Nguyen Quynh Chi(Nq.chi@kotra-hanoi.org.vn)

 

 

1. Overall Vietnam Franchise Market

 

 ○ 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.

 

 ○ Although franchising has made its appearance in Vietnam in the late 1990s but it didn’t receive full attention because of lack of legal infrastructure. In 2006, new rules were passed to recognize and materialize the state control over this way of doing business. Through mass media, many conflicting opinions along with misunderstanding about this practice have reaches consumers, making many business persons feel confused when studying or deciding on this new way of doing business.

 

 ○ Franchising in Vietnam continues to grow rapidly, with only 6 foreign registered franchise systems in 2007 to 110 franchise systems as of January 2014. These franchise chains mainly originated from the United States, Australia, South Korea, Singapore, Thailand, Japan, Hong Kong, Canada, France, United Kingdom, Malaysia, Philippines.

 

 ○ Few years ago, not many local companies could directly buy franchising from big brands. KFC or Pizza Hut brands are franchised to Singaporean or Malaysian companies. In the case of Lotteria, the parent company does the work itself in Vietnam. It is because of shortage of financial capability and management experience in franchising. Recently a few individuals as well as local private enterprises have caught eyes of global brands because of their financial status, thorough understanding of local tastes and excellent management skills.

 

 ○ The franchise boom has been seen mostly in the food/beverage/restaurant sector. However, it can be seen in other sectors as well, such as education, fashion and healthcare.

 

        Source: Statistics of Ministry of Industry and Trade

 

                Source: Statistics of Ministry of Industry and Trade

 

    Source: Statistics of Ministry of Industry and Trade

 

Korean registered franchise systems in Vietnam

             Source: Statistics of Ministry of Industry and Trade

 

 

2. Franchising on Food and Beverage Business

 

 ○ According to statistics of Euromonitor, the Vietnamese fast-food market, which valued at 543.6 million USD in 2012 reached the growth rate at 13.9% and is expected to increase 15% in 2014.

 

 ○ According to W&S Market Research’s survey in 2012, main customers of fast-food restaurants are families or young people aging from 24 to 29. Many parents take their children to fast-food restaurants to celebrate their birthdays and special occasions or to meet their friends; young people come to fast-food restaurant at least once every three months. Also according to the survey, customers prefer fast-food restaurants because of its quick and convenient services as well as free toys, play areas and other perks such as air-conditioning.

 

 ○ Many big global fast-food brands have expanded their businesses into Vietnam and win customers via franchise deal, for example: Kentucky Fried Chicken (KFC) (USA), Burger King (USA), Jollibee (Philippines), Lotteria (Korea), Pizza Hut (USA), Subway (USA) and most recently McDonald’s (USA), etc. Among those, by the end of 2013, Lotteria and KFC have been leading the fast-food market in terms of consumption value and the number of outlet in Vietnam (according to survey of CB Richard Ellis Vietnam Company - CBRE). Currently KFC tops market share with 16% and 79% among popular fast-food brands (KFC, Lotteria, Pizza Hut, and Jollibee).

 

 ○ KFC, Lotteria and Jollibee were the first comers since 90s, but they entered the market by direct investment of franchises from Singapore, Malaysia or by themselves in the case of Lotteria. They set the goal to start franchise systems after they expanded to over 100 outlets.

 

        Source: Kotra’s survey

 

Popular fast-food brands in Vietnam and their market shares

      Source: FTA Research June 2012

 

 ○ Why is franchise potential in Vietnamese food and beverage market?

  - Consumers’ characteristics: Although traditional foods have become indispensable to Vietnamese people, but Vietnam was a colony of France, and people are used to bread and using their hands to eat. Also, the young people are strongly impacted by globalization and international lifestyle and they accept fast-food products as potential alternatives to more traditional choices. The young consumer is seeking Western brands where they know they will get value, quality, convenience and good customer service.

  - Macro-economic features: Vietnamese consumption is being driven by two factors: a large population, of which young population makes up a large part, rising middle-class incomes.

   · Vietnam’s population was approximately 92 million (as of July 2013) and it is growing by 1% per year. 43% of the population is below the age of 25. Vietnam’s workforce population is estimated to grow over 15% over the next 20 years, compared to China’s -2% over the same period (Source: Citigroup Global Markets, UN Population Division).

   · Vietnam has averaged economic growth of 6.6 percent this century quadrupling its per-capita income to $1,896 in 2013 from $402 in 2000, according to International Monetary Fund estimates. The gain has given the country middle-income status, according to the World Bank.

   · In 2011, the national average income was close to USD 1,300 per year, but was USD 2,700 in Hanoi and USD 3,600 in Ho Chi Minh City (Source: Doing Business in Vietnam: 2013 Country Commercial Guide for U.S. Companies). In addition, Business Monitor International estimates that private consumption will jump from US$ 80.5 billion to US$ 250 billion (2011–2020).

  - Franchising would be the choice of many foreign groups, because the method allows them to save time and lower the investment costs. If making direct investment, they would have to spend time and money to develop the market. Meanwhile, they would be able to reduce the costs and avoid legal risks.

  - Country’s features: There are more and more foreign travelers as well as foreign residents in the countries. According to data released recently by the General Statistics Office, foreign tourists having been to Vietnam numbered more than 722,000 (people) in January 2014, up 16% against December 2013 and 20.79% over the same period last year. The foreigners tend to find the popular international brands that they are familiar with.

  - Under the WTO obligations, Vietnam will have to permit the establishment of wholly foreign-owned businesses, including retailers, and some of the world's leading retailers have expressed great interest in the Vietnamese market. That means foreign investors would be easily penetrating the Vietnamese market.

 

 ○ Difficulties

  - Ingredients: Foreign chains face difficulties in seeking qualified supplying networks for their products. Vietnamese suppliers cannot meet the standards to provide ingredient. Vietnamese ingredients used for KFC products only account for 30%. The rate is 20% for Dunkin’ Donuts. South Korea's Lotteria imports all its potatoes and sauces and Burger King uses only foreign ingredients except for buns. McDonald’s which has recently opened the first restaurant use 100% imported beef, only buns are provided by a local supplier. BBQ Chicken also has to import supplies from its mother company in South Korea. Asia Bakery and Confectionery (ABC Bakery) chain is a rare local success, being the exclusive bun suppliers to KFC, Lotteria, and Burger King and recently it has been chosen to be the supplier of bun for McDonald’s. On the other hand, the Thai-backed CP Group is the main chicken supplier for KFC, Lotteria and BBQ Chicken in Vietnam.

  - Price: Because the ingredients are mostly imported, the price of franchised fast food and beverage is relatively compared highly to traditional foods. Ingredient costs account for up to 35-55% of the price of BBQ Vietnam’s product. For example, the sandwich of a fast-food franchised brand is priced at almost double what it costs for a street-vendor meal of noodles. Price of the ice-blended coffee of The Coffee Bean (US$ 3-4) is three times higher than that of a cup of Vietnamese milk coffee (US$ 1-1.5).

  - Premises rents: Foreign franchisers would face a big difficulty – the high retail premises rents. The retail premises located on advantageous positions, which can easily catch up the attention of passers, are believed to decide the success of retailers. Meanwhile, the rents of retail premises in Vietnam are the highest in the world, which have been increasing steadily by 20-30 percent per annum. The rents account for 25-30 percent of the total revenue of franchise shops.

 

 

3. Import Tariff

 

□ Import Trend

 

 ○ The import volume of coffee into Vietnam market recorded an incredible growth from 2008 until now at the growth rate of almost 300%. Of which the highest increasing volume was in 2012 with the rate of 3.5 times. The total import volume got a significant decline in 2013 by 18% compared to previous year. During 2008-2012, Laos, Area Nes and Indonesia had been 3 biggest exporters of coffee into Vietnam market. However, turning to 2013, the exclusive position already changed. Indonesia became the highest with the growth rate of 30%, in contrast, Laos and Nes with a sharply deep down in the record of non-volume. In replacing, China, Singapore, Cote D’Ivoire, and USA raised up to become the top exporter with the impressive growth rate.

 

             Source: ITC calculations based on UN COMTRADE statistics

 

 ○ In 2013, total imported coffee into Vietnam reached 28 million USD, a 18% down trend. Laos and Area Nes disappeared in the import map of coffee of Vietnam. Instead, Indoniesa with the market share of 40% became the biggest exporter, next China 28%, Singapore, and USA at the same share of 6-7%. Korea with some representative of coffee franchise such as Coffee bean, recorded a small market share since 2013, however, the result will be expected a better share from 2014 after the joining of Coffee bene, Angle in us into Vietnam in 2014.

 

List of supplying markets for a product imported by Viet Nam

Product: 0901 Coffee

                                                                                                                        Unit: US Dollar thousand

        Sources: ITC calculations based on UN COMTRADE statistics

 

□ Import Tariff

 

      Note: MFN: Most favored Nations (Korea belongs to this group of nations)

               ATIGA: Asian Trade in Good Agreement

               ACFTA: ASEAN – CHINA Free Trade Area

               AKFTA: ASEAN – KOREA Free Trade Area

      Source: Export – Import Tariff and VAT on Imports Book 2012 (Ministry of Finance)

 

 

4. Legal Framework

 

□ Vietnamese Policy in franchising

 

 ○ 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:

  - 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;

  - The goods/services subject to the franchise must not be those in which business is prohibited, restricted, and subject to further conditions; and

  - A trader shall be permitted to receive commercial rights when having the registration of business lines subject to commercial rights.

 

 ○ Foreign business entities seeking to grant a franchise in Vietnam are obliged to register their franchising activities with the competent State body. The competent body is the Ministry of Industry and Trade (MOIT).

 

 ○ Article 1 of Decision No. 106/2008/QD-BTC of the Ministry of Finance dated 17 November 2008, provides for the charging of registration fees in relation to the registration of franchising activities. The fees for registration of franchising activities are as follows:

 

 ○ A foreign business entity granting a franchise in Vietnam:

  - Issuance of a new notice: 16.5 million VND (USD785 thousand)

  - Amendment or addition to the notice: 6 million VND (USD285.7 thousand)

  - Re-issuance of the notice: 500,000 VND (USD23.8 thousand)

 

 ○ Regarding tax obligations, pursuant to the Law on Corporate Income Tax, the general corporate income tax rate applied to both foreign owned enterprises and local enterprise is 25%.

 

 ○ Information disclosure: Decree 35 now requires an information disclosure document, something equivalent to the UFOC. Such information disclosure document must be made in a format that contains compulsory contents as prescribed by the Ministry of Trade (“MOT”) under its Circular 09/2006/TT-BTM dated May 25, 2006 (“Circular 09”). It must be submitted to the MOT or the provincial Department of Trade in order to register the franchising activities

 

 ○ Registration requirement: Decree 35 does not impose strict registration requirements on a franchised business. A franchisor whether from abroad or from Vietnam has only to register its franchising business one time before it starts to do business. The registration is with the MOT if either the franchisor or the franchisee is offshore, and is with the provincial Departments of Trade if both parties are in Vietnam. A franchisor and a franchisee may freely negotiate terms and conditions of a franchise agreement. Decree 35 gives some suggested terms and conditions which can be used for reference, but it is not compulsory to include them in a franchising agreement. Assuming that one’s franchising business has been registered as discussed above, it is not required that the franchising agreement itself be registered, except for registration in respect of licensing of intellectual property rights that are associated with a franchised business and that fall under the regulations on intellectual property. Regulations on intellectual property, as provided in the Law on Intellectual Property, are rather open. An agreement to license the right to use an intellectual property object, for example a trademark, need not be registered with any authority in order to be effective. The parties to such a licensing agreement, however, are free to register it with the NOIP in order to protect it from a third party’s claim, and the procedures to do so are rather simple. The Ministry of Trade or the Department of Trade is the authorities that will oversee franchising activities, depending on the kind of franchising. Franchising contracts for franchises from overseas to Vietnam, and from Vietnam to overseas must be registered with the Ministry of Trade not later than fifteen working days from the date of execution of the contracts.

 

 ○ The application to register franchising activities must contain the following documents:

  - Application for registration of franchising activities (in the standard form);

  - Introduction letter on franchising system (in the standard form);

  - Documents in respect of legal status of the franchisor and certificates of the intellectual property registered in Vietnam or abroad if the franchisor wishes to license such intellectual property;

 

 ○ Within five working days from the date of receipt of a full and valid application, the authority shall register the franchising activities and notify the franchisor of such registration.

 

 ○ Language: Decree 35 requires all franchise agreements to be made in the Vietnamese language unless the franchise is transferred from Vietnam to a franchisee abroad. According to the explanation of the MOT, this requirement has been included because many local franchisees are small and medium-size entrepreneurs who are not familiar with a foreign language. A franchising agreement made in Vietnamese is intended to ensure that a local franchisee thoroughly understands and properly performs the agreement and to avoid disputes due to misinterpretation.

 

 ○ The decree is an important step, contributing to the improvement of the legal framework on franchise relied upon by businesses in actualizing franchise agreements in Viet Nam. However, the decree also has shortcomings and inappropriate provisions which may somewhat hinder the expected boom in franchises, including restrictions on franchise and requirements for franchise agreements.

 

 ○ Article 3 of the decree defines "general commercial rights" such as the right of a franchisor or franchisee to grant a sub-franchise to a third party. However, the decree restricts sub-franchisees to grant such rights to any other. This provision creates tensions and may lead to an understanding that the sub-franchisee is prohibited from further grant franchises to partners.

 

 ○ "General commercial rights" should be commercial rights in the true sense of the word, dependent only on the discretion of the contracting parties and without any further restrictions. If the owner of a franchise grants rights to franchisees or sub-franchisees to grant further franchises, there should be no restrictions set by law.

 

 ○ The decree also sets a time limit on cases in which a Vietnamese party receives a franchise from abroad. A local franchisee shall lose the right to sub-franchise to another unless it has already exercised its franchise for at least a year. This restriction could have adverse effects on the expansion of franchises in Viet Nam.

 

 ○ As to franchise agreements, the decree requires all franchise agreements to be made in the Vietnamese language unless the franchise is transferred from Viet Nam to a franchisee abroad. In practice, this requirement is highly unfavorable to foreign franchisors because many use extensive franchise agreements that have already been drafted and standardized for use in a variety of international markets. The common language for such multinational transactions is English, and the English version of the contract is the one likely to be relied upon by the parties, so requiring a Vietnamese translation of such an agreement is cumbersome.

 

 ○ Importantly, Decree No. 35 does not impose specific registration or licensing requirements on franchisees. Rather, according to Decree No. 35, franchisees must only be duly licensed to engage in the business contemplated by the proposed franchise agreement. So, in the case of a restaurant franchise, the franchisee must be a person or entity duly licensed to engage in the business of restaurant services. In the context of a franchise, technology could be serious secrets and knowledge if they form part of the franchised business. Currently, the transfer of technology must go through registration procedures at the MOST and the registration is limited to duration of 7 or 10 years.

 

 ○ The law should make no restrictions, which would be considered as obstacles to foreign franchise holders who are considering Viet Nam as a potential market.

 

 ○ New Decree 15/VBHN-BCT of Ministry of Industry and Trade issued on 25.04.2014 is to make more detailed on regulation of commercial law of franchising based on Decree No. 35/2006/ND-CP dated 31.03.2006 and Decree 120/2011/ND-CP dated 16 December 2011:

 

 ○ New updated and fixed content regarding to commercial law of Franchising:

 

 ○ Add moreCases not registered to franchise

  - Chapter 3: Registration of Franchising

  - Article 17a: The cases not registered to franchise

   · Franchising in the inner country;

   · Franchising from Vietnam to abroad.

 

 ○ Eliminate Section 1b) and 2 in Article 18: Decentralization of registration of franchise

  - Whereby, in Decentralization of registration of franchise just regulates in the duty of Ministry of Industry and Trade just makes operating the registration of franchise following:

 

 ○ Add more regulation about Dossiers registration of franchise

  - Whereby, in Section 4 of Article 19: Dossiers registration of franchise, The documents specified in paragraph 2 and paragraph 3 of this Article shall be legalized under the provisions of the law of Vietnam

 

□ Prevailing legal provisions on franchise in Vietnam

 

 ○ Franchising activity has been officially considered as a commercial activity since the effective date of the Law on Commerce 2005. Currently, franchising activities in Vietnam are officially regulated by the following provisions:

  - Law on Commerce 2005

  - Decree No. 35/2006/ND-CP

  - Circular No. 09/2006/TT-BTM

  - Decision No. 106/2008/QD-BTC

  - Law on Intellectual Property 2005

  - Law on Technology Transfer 2006

  - Decision No. 10/2007/QD-BTM

  - Decree No. 23/2007/ND-CP

  - Circular No. 09/2007/TT-BTM

  - Circular No. 05/2008/TT-BTM

  - Official Document No. 4422/BCT-KH

  - Official Document No. 6656/BCT-KH

  - Decree 120/2011/ND-CP

  - Decree 15/VBHN-BCT

 

 ○ Conditions for commercial franchise in Vietnam:

  - Conditions for franchisors

  - Pursuant to Article 5 of the Decree No. 35/2006/ND-CP, a trader shall be permitted to franchise when fully satisfying the following conditions:

   · 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 commercial franchising for at least one year in Vietnam before sub-franchising).

   · Such trader has registered commercial franchising with competent agencies;

   · Goods and services covered by commercial rights are permitted to be traded (not in the list of goods and services banned from trading. In case they are in the List of goods and services restricted from trading, enterprises are allowed to trade only after being granted Business Licenses or other legally equivalent documents by competent authorities, or fully satisfying business conditions.)

  - Conditions for franchisee

   · In accordance with Article 6 Decree 35, a trader shall be permitted to receive commercial rights when having the registration of business lines subject to commercial rights.

  - Sub-franchise:

  - Sub-franchise shall only be performed by the franchisee when the following conditions are satisfied:

   · The intended transferee satisfies all conditions of the law for the franchisee;

   · Such transfer is consented by the franchisor, who has implemented the franchise to the franchisee.

  - The agreement of the primary franchisor shall be performed within 15 days after receiving a written request on the sub-franchise of the primary franchisee. After such 15 days, the primary franchisor shall be deemed to have consented the sub-franchise if failing to reply.

  - The primary franchisor shall only be entitled to reject the franchise to the third party if:

   · The intended transferee fails to meet its financial obligations under the franchise contract.

   · The intended transferee has not yet satisfied all criteria of the direct franchisor.

   · The sub-franchise may cause big negative impact on the current franchise system;

   · The intended franchisee disagrees in writing to fulfill obligations of the franchisee under the franchise contract;

   · The franchisee has not yet fulfilled its obligations with respect to the direct franchisor, except the intended franchisee makes a written commitment to implement such obligations for the franchisee.

  - By approving the sub-franchise, the primary franchisor shall no longer possess the transferred commercial rights. All rights and obligations related to commercial rights of the primary franchisor shall be transferred to the primary franchisee, unless otherwise agreed.

 

 ○ Right and responsibility of franchisor

  - Unless otherwise agreed, franchisor shall have the following rights and obligations:

  - Rights

  - Franchisor shall have following rights:

   · To receive franchise sums.

   · To organize advertising for the commercial franchise system and the commercial franchise network

   · To conduct periodical or extraordinary inspections of activities of franchisee in order to ensure the uniformity of the commercial franchise system and the stability of quality of goods and services

  - Obligations

  - Franchisor shall have following obligations:

   · To supply documents guiding the commercial franchise system to franchisee;

   · To provide initial training and regular technical assistance to franchisee for managing the latter's activities in accordance with the commercial franchise system;

   · To design and arrange places of sale of goods or provision of services at the expenses of franchisee;

   · To guarantee the intellectual property rights over objects stated in franchise contracts;

   · To equally treat all franchisee in the commercial franchise system.

   · Payment of finance or tax obligations to Tax Authorities of Vietnam (if any), including: contractor tax (Corporate income tax, personal income tax, value added tax, etc.), other taxes and fees as regulated by Vietnamese laws.

 

 ○ Right and responsibility of franchisee

  - Unless otherwise agreed, franchisee shall have the following rights and obligations:

  - Rights

  - Franchisee shall have following rights:

   · To request franchisor to provide fully technical assistance related to the commercial franchise system;

   · To request franchisor to equally treat all franchisees in the commercial franchise system

  - Obligations

  - Franchisee shall have following obligations:

   · To pay franchise sums and other amounts under commercial franchise contracts;

   · To invest adequate material facilities, financial sources and human resources to take over business rights and know-how transferred by franchisor;

   · To submit to the control, supervision and instruction by franchisor; to comply with all requirements set forth by franchisor on designing and arrangement of places of sale of goods or provision of services;

   · To keep secret the franchised business know-how even after the expiration or termination of commercial franchise contracts;

   · To stop using trademarks, trade names, business slogans, logos and other intellectual property rights (if any) or systems of franchisor upon the expiration or termination of commercial franchise contracts;

   · To manage their activities in accordance with the commercial franchise system;

   · Not to sub-franchise without permissions of franchisors

   · On behalf of franchisor, payment of tax and finance obligations (if any) in case franchisor does not have residential address in Vietnam, such tax and finance shall be refunded for franchisee.

 

□ Registration of commercial franchise

 

 ○ Before conducting commercial franchises in Vietnam, Vietnamese traders and foreign traders that intend to franchise must register commercial franchise with competent authorities under Vietnamese regulations as follows:

  - Ministry of Industry and Trade shall register the following commercial franchises:

   · Commercial franchises from overseas into Vietnam, including commercial franchise from export processing zone, non-tariff areas or separate customs area specified by Vietnamese law into Vietnamese territory

   · Commercial franchises from Vietnam to overseas, including commercial franchises from Vietnamese territory into export processing zone, non-tariff areas or separate customs areas specified by Vietnamese law.

  - Department of Industry and Trade of provinces or centrally-run cities where traders that intend to franchise make business registration shall register commercial franchise at home, except for franchising across boundaries of export processing zone, non-tariff areas or separated customs areas specified by Vietnamese law.

 

 ○ Application Dossiers and procedures for registering commercial franchises shall be described in detail in Item 3 Part B.

 

□ Procedures for registering commercial franchise in Vietnam

 

 ○ An intended commercial franchisor shall have obligations to register commercial franchise with Vietnamese competent authorities if they want to conduct commercial franchise in Vietnam.

 

 ○ Thus, when implementing commercial franchising activities, franchisor has to conduct works with both licensing authorities and franchisee.

 

 ○ In relation with the licensing authorities in commercial franchising registration, franchisor needs to pay attention to some basic legal as follows:

  - Competent authorities have rights to register commercial franchise

  - Procedure for registering commercial franchise

  - Notification of changes in registered commercial franchise information and revocation of commercial franchising registrations

 

 ○ In relation with franchisee in commercial franchising activities, franchisor needs to pay attention to some contents as follows:

  - Contents of commercial franchising agreement

  - Term of commercial franchising agreement

  - Language of commercial franchising agreement

 

 ○ Thus, in accordance with Vietnamese law, before implementing commercial franchise, Vietnamese traders or foreign traders intend to franchise have obligations to register commercial franchising activities with Vietnamese competent authorities. Registration procedures are distinguished between domestic and foreign commercial franchising activities.

 

 ○ Registration for domestic commercial franchise

  - Competent authorities

   · Competent authority register domestic commercial franchise (except for franchising across boundaries of export processing zone, non-tariff areas or separated customs areas specified by Vietnamese law) is Department of Industry and Trade of provinces or centrally-run cities where traders that intend to franchise make business registration.

   · The stipulation, in which the competence belongs to the Department of Industry and Trade, is absolutely reasonable, because franchise activity is although a new form of business activity, its procedure is rather simple. This activity, therefore, should not be registered at Ministry of Industry and Trade for the overlap may happen.

  - Procedures for registering domestic commercial franchise

  a) Application Dossier for registering domestic commercial franchise includes the following documents:

   · An application for commercial franchising registration (made according to a set form MD-2 in Appendix II, Circular 09/2006/TT-BTM);

   · A written description of commercial franchise (made according to a set form in Appendix III, Circular 09/2006/TT-BTM);

   · A notarized copy of the business registration certificate or investment certificate;

   · A notarized copy of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted;

   · Papers proving the approval of the primary franchisor’s permission of franchise in case the trader registering franchising is the secondary franchisor;

   · Documents and Dossiers are declared according to a set form and guideline enclosed Circular 09/2006/TT-BTM.

  b) Procedure for registering domestic commercial franchise

   · After preparing Application Dossier with all above-mentioned documents, traders intend to franchise have obligations to submit Application Dossier for registering commercial franchise to Department of Industry and Trade.

   · Registration procedure is described in this diagram:

 

                Notes: Procedure for registering license contract with industrial property subject shall be implemented under industrial property regulations

 

 ○ Registration for foreign commercial franchise

  - Competent authorities

   · Ministry of Industrial and Trade has competence to register foreign commercial franchising activities, includes these following cases: Franchising from overseas to Vietnam (including franchising from across boundaries of export processing zone, non-tariff areas or separated customs areas to Vietnam); Franchising from Vietnam to overseas (including franchising from Vietnam to across boundaries of export processing zone, non-tariff areas or separated customs areas)

  - Procedure for registering domestic commercial franchise

  a) Application Dossier

   · Application Dossier for registering commercial franchise includes the following documents:

   · An application for commercial franchising registration (made according to a set form MD-1 in Appendix II Circular 09/2006/TT-BTM);

   · A written description of commercial franchise (made according to a set form in Appendix III Circular 09/2006/TT-BTM);

   · A notarized copy of the business registration certificate or investment certificate, in case of commercial franchises from Vietnam to overseas; a copy of the foreign trader’s business registration certificate or paper of equivalent validity, certified by a competent agency of the place where the foreign trader is set up, in case of commercial franchises from overseas into Vietnam;

   · A notarized copy of the industrial property right protection title in Vietnam or a foreign country, in case of licensing industrial property subject matters for which protection titles have been granted;

   · Papers proving the approval of the primary franchisor’s permission of franchise in case the trader registering franchising is the secondary franchisor.

  b) Procedure for registering foreign commercial franchise

   · After preparing Application Dossier with all above-mentioned documents, traders intend to franchise have obligations to submit Application Dossier for registering commercial franchise to Ministry of Industry and Trade.

   · Registration procedure is described in this diagram:

 

                   Notes: Procedure for registering license contract with industrial property subject shall be implemented under industrial property regulations

                              In case registering foreign commercial franchise, if documents are in a foreign language, their Vietnamese translations notarized by state notaries public shall be required. Where copies of foreign traders’ business registration certificates or papers of equivalent validity specified at Point c, Clause 2 of this Section are in a foreign language, their Vietnamese translations certified by foreign-based Vietnamese diplomatic representations and consularly legalized according to the provisions of the Vietnamese law shall be required.

 

 

5. Recommendation

 

□ Recommendations

 

 ○ Foreign business entities should find the right partners (franchisees) with strong financial status, a thorough understanding of local market conditions, and good communication skills.

 

 ○ The franchisers and franchisees need to identify the appropriate time to open the a business.

 

 ○ Franchisors should document and register their intellectual property rights separately to registering their franchising activities and be well prepared to take legal action against IP violations. According to lawyers, franchisors must prepare franchising contracts carefully to avoid experiencing problems.

 

 ○ Understand the cultural difference and adjust one’s market access strategy accordingly. Franchisors must consider adapting to local culture, habits, and tastes to guarantee success in the market.

 

 ○ Minimize the price of the product and the franchising fee to achieve rapid expansion. The specifics of the local market will require a more flexible approach than when dealing with foreign counterparts.

 

 ○ Franchisers need to choose advantageous locations of stores/restaurants and have strategies to expand the chains. Good spaces in streets are most wanted due to traffic convenience as well as better branding identification. A good distribution chain would decide the success of the franchise system.

 

 ○ Marketing strategies play an important part in the success of a franchise. Many foreign franchises in Vietnam have applied different methods to attract customers, for example mass media, promotion (discount, buy 1 get 1 or buy the whole combo for cheaper price, etc.). This would somehow convince price-conscious customers that they could get cheaper products.

 

□ Fair in 2014

 

 

□ Conclusion

 

 ○ The franchise industry in Vietnam is in its infancy but for potential business owners seeking a secure investment for their hard-earned capital, it could prove to be the ideal solution. Although the number of foreign franchised brands is small (110 franchise systems) compared to Japan and China with over 2,600 brands, or India, the Philippines and Australia with more than 1,000 brands, franchises have become an increasingly active retail sector for foreign investors.

 

 ○ In addition to the fact that Vietnam has a high percentage of young people and a growing economy, South Korean food has been favored by South Asian countries especially Vietnam, which stimulate Korean business entities to tap into this potential market.