SCHOOL OF BUSINESS, WESTERN SYDNEY UNIVERSITY

ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Tran Thanh Binh Student ID number: 21001422

UNIT AND TUTORIAL DETAILS

Unit name: Business Law Unit number: BL-T222WSB-4

Tutorial/Lecture: Class day and time: Tuesday 15:30-18:45
Lecturer or Tutor name: Mr. James Weisman and Dr. Le Hung Long

ASSIGNMENT DETAILS

Title: Essay: Problem Questions: Commercial franchise in Vietnam

Length: 1659 words Due date: 7/8/2022 Date submitted: 7/8/2022
Home campus (where you are enrolled): Vietnam

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current) assessment, except where appropriately referenced, and with prior permission from the Lecturer /
Tutor / Unit Coordinator for this unit.
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Student’s signature: Tran Thanh Binh

Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has not been
signed.
ARO 00398 09/15
 I. Introduction
A commercial franchise is a business activity that franchisors allow and require the
franchisees carry out by themselves in order to buy, sell, or offer services under specific
conditions. A commercial franchise contract directs a business on how to use a product or a
method of operation that is covered by industrial property rights and is therefore protected.
Commercial franchise involved in the trademarking of goods, the transfer of technology,
trademark of goods or others.
To ensure an enabling legal environment for franchises, as well as in light of the country's
potential WTO accession, Viet Nam has enacted a series of legislative and administrative
acts, including the Commercial Law (2005), which provides the basic rules for franchising;
Decree No. 35/2006/ND-CP (as amended by Decree No. 120/2011/ND-CP); and Circular No.
09/2006/TT-BTM, which enacted specific implementing provisions.
Franchise networks are now used by several well-known foreign companies to target
Vietnamese consumers. The franchise has become a popular concept with various brands
including KFC, Unilever, Family Mart, Haidilao, etc. expanding quickly. According to the
Vietnamese Ministry of Industry and Trade (MOIT), there are more than 235 foreign brands
registered as franchising enterprises in Vietnam as of April 2020. Fast food, bakery, coffee,
beverages, and restaurants make for more than half of all franchise contracts signed. The
majority of franchisors are based in the United States, Australia, South Korea, Singapore,
Thailand, and Japan. Although it has been usual to receive franchises from foreign
franchisors, numerous Vietnamese companies have also been franchised both domestically
and internationally. Well-known local Vietnamese franchises, such as noodle soup shops,
coffee shops, convenience stores, and supermarket chains, have also registered and are
franchising both within and outside of the country. Trung Nguyen Coffee, Pho 24, Kinh Do
Bakery, and thegioididong.com are among the Vietnamese firms that have embraced
franchising.

II. Prerequisites
Franchisor requirements:
The following prerequisites must be met by a franchisor in accordance with Article 5 of
Decree 35:
(1) A trader may only issue commercial rights once the intended franchise business system
has been operational for at least a year. When a Vietnamese trader is a foreign franchisor's
primary franchisee, that trader must operate in Vietnam using the franchise model for at least
a year before sub-franchising;
(2) The trader's legal status is that they have registered their commercial franchising with the
appropriate agency and have been approved. Only foreign traders are subject to this
registration requirement (franchisors).
(3) Commercial rights apply to the products and services provided by businesses: The
products and services that are allowed for commercial franchising are those that are not on
the list of prohibited items. Only after completely meeting all business requirements and/or
receiving business licenses or papers of equivalent value from the competent agency,
businesses shall be permitted to deal in goods and/or services that are on the list of restricted
goods and services or the list of restricted goods and services subject to conditional business.
Franchisee requirements:
Franchisees are required to register their businesses in compliance with the subjects of
commercial rights, under Article 6 of the implementing order.

III. Information disclosure

Decree 35 mandates the use of an information disclosure document known as the
Franchise Description Document (see the Appendix for further details). The MOIT's Circular
09. requires that a standardized form is used to prepare the FDD. In order to register the
franchising operations, it must be submitted to the MOIT. Unless the parties agree differently,
the franchisor is required by Decree 35 to give the prospective franchisee or master
franchisee the FDD and a copy of the franchise agreement form at least 15 working days
before the agreement is signed.

IV. Ongoing obligations for disclosure

In addition to the initial disclosure specified in the FDD, a franchisor must inform its
franchisees of any substantial changes pertaining to its franchise system. Any change that
could affect a franchisee's commercial operations is considered a "major change."
According to Circular 09, the franchisor must notify the MOIT of any change in the
following: (a) name; (b) address of the head office; (c) telephone and fax number; (d) date of
incorporation; (e) information regarding the franchisor's status within the franchise (i.e.,
whether the franchisor is a master franchisor or a franchisee to sub-franchise to another
person); (f) business scope; g) the sort of business to be franchised; or (h) information about
the franchise registration. The report is to be filed within 30 days of the change's effective
date.

V. Requirements for registration

Franchises from abroad, as well as those from an export processing zone, a non-tariff
region, or a distinct customs area, must register. A foreign franchisor just needs to register
their franchising company once. The MOIT must receive this registration.

Included in the registration dossier must be:

Franchise Description Document; certified copies of the franchisor's business registration;
certified copies of the franchisor's audited financial statements for the year prior to the date of
registration; and certified copies of the franchisor's patents and certificates relating to
intellectual property rights. Registration of franchise activity is made on a standard form
provided in Circular 9.
A certified translation is necessary if any of the aforementioned documents are written in
another language.
A document issued by the master/primary franchisor allowing the applicant, a master
franchisee/sub-franchisor, to sub-franchise the firm must also be shown.

Whether or if the paperwork submitted for registration of the franchising activity

complies with disclosure requirements is up to the MOIT's decision. The Franchise
Description Document might need to be amended or updated. It is advisable for a franchisor
to use the FDD, which has a format comparable to the template offered in Circular 09, for
registration purposes.

Five working days from the date the franchisor submits a comprehensive dossier are
the required amount of time for the MOIT to register the franchising activity. In reality, the
period may last for a month or longer.
The conditions and terms of a franchise agreement are open to discussion between a
franchisor and a franchisee. The suggested terms and conditions provided in Decree 35 can
be used as a guide, but they are not required to be included in a franchise agreement.

Except if necessary to register the licensing of intellectual property rights that are
connected to a franchised firm and come within the rules on intellectual property, the
franchising agreement itself need not be included in the registration dossier. The
requirements for concluding and registering such an agreement are quite lenient under the
licensing laws of the Law on Intellectual Property. A trademark licensing agreement (or
"TLA"), for instance, does not need to be registered with any authority in order to be in force.
It only licenses the right to use a piece of intellectual property. The National Office of
Intellectual Property ("NOIP") registration will shield the asset from a third party claim,
therefore the parties to such a licensing agreement may choose to do so. In order to send
license payments, some banks may also demand proof of registration.

There is no necessity in Decree 35 to report any potential technology transfer that

comes along with a franchise. If they are a component of the franchised firm, business secrets
and know-how could be referred to as technology in the context of a franchise. The Law on
Technology Transfer specifies that only written contracts can transfer technology. The
technology transfer agreement (or "TTA") must be recorded in the following situations when
there is a transfer of technology that could go along with a franchise or the other way around:
Technology transfer from outside, technology transfer from Vietnam to another nation, and
technology transfer using state capital are all prohibited unless they have received some sort
of certificate of registration for science and technology. In addition to the aforementioned
conditions, the Law on Technology Transfer advises parties to such an agreement to register
it with the appropriate authorities in order to benefit from the provisions of this Law and
other associated regulations. A TTA is nonetheless enforceable between its parties and with
any third party, with some limitations, even if it is not registered. Again, in order to send fees,
some banks would require a registered TTA. The statute outlines the areas where technology
transfer is prohibited. In those circumstances, the Ministry of Science and Technology
("MOST") must issue a certificate before the TTA can go into force.
 The Law on Technology Transfer stipulates that technology transfer shall respect
international agreements to which Vietnam is a party and not endanger national interests,
human health, national cultural values, the environment, or natural resources.

VI. Benefits
The franchising business model is well-known and suitable for an emerging economy like
Vietnam. Since franchising offers investors a relatively quick way to start a firm with
controlled levels of investment and at a lower risk, it is perfectly adapted to the culture of
entrepreneurship.The benefit of franchising is the low risk rate, because the business process
is already very solid. The products and services that have been launched into the market are
already well received and successful. At the same time, the franchisors also have a clear
understanding of their own products and service promotion campaigns.
Problems and challenges
Government oversight of domestic franchising in terms of administrative sanctions,
controls, and examination is limited. As a result, the government's ability to effectively
enforce the law in regards to domestic franchising is weak and insufficient. In order to
address the issues, state management organizations must assure strict, ongoing supervision by
modifying existing rules or issuing new ones to monitor, regulate, and impose administrative
penalties on franchising activities across the country.

VII. Conclusion
To sum up, the regulations governing the franchisor's duty to provide information serve to
ensure and support the franchisee in making the decision to join or not join the franchise
system. Vietnamese law has laid the groundwork to protect franchisee rights by limiting the
franchisor's information privilege and reducing the unfair informational distance between the
franchisor and franchisee in the franchise relationship. These regulations regarding the
franchisor's obligations were previously mentioned.
Reference list
Nguyen, T., 2021. Vietnam - Franchising Industry Sector. International Trade Administration |

Trade.gov. https://www.trade.gov/country-commercial-guides/vietnam-franchising-industry-

sector

Vecchi, R., 2022. Legal Framework For Franchising In Vietnam - Franchising - Vietnam. [online]

Mondaq.com. https://www.mondaq.com/franchising/1196594/legal-framework-for-franchising-

in-vietnam

Global Vietnam Lawyers. 2022. Những lợi ích của nhận nhượng quyền thương mại là gì? - Global

Vietnam Lawyers. https://gvlawyers.com.vn/nhung-loi-ich-cua-nhan-nhuong-quyen-thuong-mai-la-

gi/?lang=vi

An, V., 2022. Commercial franchise. Vietanlaw.com. https://vietanlaw.com/commercial-franchise/

 Appendix

 The Franchise Description Document

Prescribed form of the Franchise Explanation

Description Document as provided in
Circular 09
This Franchise Description Document
contains information for a prospective
franchisee to study carefully before entering
into a franchise agreement. A prospective
franchisee should note that:

1. Unless the parties agree otherwise, it has

at least 15 days to study the FDD and other
relevant information before entering into a
franchise agreement;

2. It should study the Commercial Law,

Decree No. 35/2006/ND-CP and this
Franchise Description Document carefully;
it should talk with other franchisees that
have conducted or are conducting a
franchise business; it should assess its
financial capacity and its ability to meet the
requirements for this form of business;

3. It should seek advice from independent

legal counsel, and independent accounting
and business consultants before entering into
a franchise agreement; and

4. It should attend training courses,

especially if it has no prior business
experience.
PART A
I. General information about the General information of the Franchisor and of
Franchisor the franchise.

1. Name of the Franchisor: After the franchise is registered with the

MOIT, the MOIT's Registration Number
2. Address: must be included before the Franchise
Description Document is disclosed to the
3. Tel/Fax (if any):
4. Date of incorporation:
5. Indicate whether the Franchisor is the
primary franchisor or a secondary
franchisor:
6. Scope of business of the Franchisor:
7. Franchised business:
8. Information on the franchise registration
as recorded with the authorities: The
franchise was registered with the Ministry of
Industry and Trade of Vietnam on
_______________ and has Registration No.
__________________.
II. Trademark and Intellectual Property
(IP) Rights
1. Right of the Franchisee to use trademarks business. It must indicate whether its
and any other IP rights.
2. Detailed information about registered
trademarks and IP rights.
PART B
I. Information about the Franchisor
1. Company's structure;
2. Name, authority and experience of
franchisee.
The franchisor must disclose information on
its trademarks and service marks that will be
used in association with the franchised
trademarks and service marks are registered
in Vietnam. If so, details of the registration
must be provided. However, it is not a
condition precedent of offering a franchise
that the trademarks or service marks to be
used must be registered in Vietnam.
The franchisor must describe its other
intellectual property rights, including patents
and copyrights, in the Franchise Description
Document. Details of registered intellectual
property rights must be disclosed to the
prospective franchisee.
The rights to use the trademarks and any IP
object granted to the franchisee should be
included in this section. If the franchisor and
the franchisee have a separate license
agreement, such agreement should be
mentioned.
Information on the business structure and
management experience of the franchisor and
its experience in the franchising business
must be disclosed to the prospective
franchisee. The franchisor must disclose
members of the board of directors of the
Franchisor;
3. Information about the division/department
in charge of the franchising activity of the The franchisor is required to disclose past
Franchisor;
4. Experience of the Franchisor in the
franchise business;
5. Information about disputes in connection or criminal proceedings that are not related to
with the Franchisor's franchise business
during the preceding year.
II. Initial fees paid by the Franchisee
1. Types and amount of initial fees that the
Franchisee has to pay;
2. Term of payment;
3. Cases involving return of fees.
III. Other financial obligations of the
Franchisee
IV. Initial investment by the Franchisee
V. Obligations of the Franchisee to buy or
lease equipment for compatibility with the
franchise system as designated by the
Franchisor
VI. Obligations of the Franchisor
background information on members of the
Board of Directors, including their names,
positions, and business experience.
and pending lawsuits related to its
franchising activities that have been filed
against the franchisor during the preceding
year. The franchisor is not required to
disclose information on civil, administrative,
its franchising activities.
The franchisor must specify types and the
amount of initial fees franchisee must pay. It
must also specify time of payment and
conditions for reimbursement of fees paid.
Other fees, including one-time payment of
fees, periodic payment of franchise fees
(royalty fees), advertising fees, training fees,
service fees, rents, etc, must also be
disclosed. For each type of such fees, the
franchisor must provide their fixed amount,
time of payment, and conditions for
reimbursement.
The franchisor must provide information on
the initial money that a prospective
franchisee must invest in the business. It
includes costs for the business premises,
facilities and equipment, decoration, and the
security system. It must also specify costs
that a prospective franchisee has to pay for
the initial inventory required to operate the
franchise business. Necessarily, some of
these costs will be estimates.
Circular 09 generally requires the franchisor
to provide the franchisee with a description
of the obligations of the franchisor,
including:
(a) obligations prior to the execution of the
franchise agreement;

VII. Description of the market of the
goods/services to be franchised
VIII. Model Franchise Agreement
1. Titles of Articles of the Franchise
Agreement;
2. Term of the Franchise Agreement;
3. Conditions to extend the Franchise
Agreement;
4. Conditions for the Franchisee to terminate franchisor/franchisee in connection with
the Franchise Agreement;
5. Conditions for the Franchisor to terminate
the Franchise Agreement;
6. Obligations of the Franchisor/Franchisee
arising from the termination of the Franchise (e) conditions under which the franchisee can
Agreement;
7. Amendment of the Franchise Agreement at
the request of the Franchisor/Franchisee;
8. Conditions for the Franchisee to assign
the Franchise Agreement to another business
(b) obligations during the course of operation
of the franchise system;
(c) obligations to consider the franchisee's
proposed premises for the franchised
business; and
(d) obligations to provide training, including
initial training, and other training programs.
The franchisor is not required to disclose its
obligations in connection with advertising
activities or its obligation to provide
computer and cash systems for the
franchisee.
The franchisor is required to provide a
prospective franchisee with a description of
the Vietnamese market for the products and
services to be franchised, including the
geographical market where the franchise
business will operate. The franchisor must
inform the franchisee on prospects for the
development of these markets.
The Franchise Description Document must
include a summary of the form of the
franchise agreement. It should include:
(a) headings of terms and conditions of the
franchise agreement;
(b) duration of the franchise agreement;
(c) conditions and obligations of the
unilateral termination of the franchise
agreement;
(d) circumstances under which the franchise
agreement can be modified;
transfer the franchise agreement to another
prospective franchisee; and
(f) circumstances under which either the
franchisor or franchisee is not legally
qualified to be a party to the franchise
entity.
IX. Information about the franchise system. The franchisor is required to disclose the
1. Number of franchise outlets which are
operating in the Franchisor's system;
2. Number of franchise outlets that were
terminated;
3. Number of executed franchise agreements; have been transferred by franchisees to third
4. Number of franchise agreements that have agreements that have been terminated or
been assigned by a Franchisee to a third
party;
5. Number of franchise outlets that have
been transferred from a Franchisee to the
Franchisor;
6. Number of franchise agreements which
were terminated by the Franchisor;
7. Number of franchise agreements which
were terminated by the Franchisee;
8. Number of franchise agreements which
have been renewed/not renewed.
X. Financial statements of the Franchisor
XI. Rewards, acknowledgements received
by Franchisor or that are required of
Franchisee
contract.
This summary is only for the purpose of
registration of the Franchise Description
Document with the relevant regulatory
authority. For purposes of disclosure to a
prospective franchisee, Decree 35 requires
that a complete form of the franchise
agreement must be delivered along with the
Franchise Description Document 15 working
days before the date the agreement is
intended to be signed.
number of outlets that have operated under
its franchise system, including the outlets
that are currently in operation and the outlets
that have ceased to operate. The franchisor is
also required to disclose the number of
franchise agreements it has signed with
franchisees, the number of agreements that
parties, and the number of franchise
renewed. However, there is no requirement
to disclose names and contact information of
franchisees.
The franchisor's audited financial statement
of the preceding year must be included. It
may be included as an attachment to the
Franchise Description Document.
The franchisor can disclose information on
awards or recognition that the franchisor may
have received or may require a franchisee to
have received.
The Franchise Description Document must
be signed by an authorized corporate person
and affixed with the corporate seal of the
franchisor.