Franchising in Vietnam is relatively new. One of the main reasons for the modest growth of franchising in the past Vietnam was the lack of a legal framework for franchising.
Franchising is rapidly spreading over all continents with many famous trademarks of giants such as McDonald’s and Carrefour.
In the early stages, there were 2 types of franchising: product distribution franchising (ie: franchise on the distribution of goods without sale method) and business format franchising, which today is the dominant mode of franchising. The latter seemed to suite the US socio-economic structure in the late of 1920s, which when combined with the economic power of the US, has marked its impressed growth all over the world. According to the International Franchise Association, there have been about 16,000 franchise systems of around 320,000 corporations in 75 different sectors.
However, franchising in Vietnam is relatively new. This business model appeared in Vietnam in the early of 1990s. Nowadays, according to statistics from the World Franchise Council, Vietnam has approximately only 70 franchise systems and nearly 100 executed franchise agreements.
One of the main reasons for the modest growth of franchising in the past Vietnam was the lack of a legal framework for franchising. Before the effectiveness of the Commercial Law 2005, franchising used to be established and disguised under other relationship forms such as licence, distribution, and technology transfer, therefore be regulated by different and separate legal documents.
To realise selling and buying franchises there, traders normally elected to enter into one or several of the above mentioned contracts instead of a franchise agreement. This caused complexity and controversial issues, but this is the only way to make the franchise feasible and enforceable in Vietnam market.
However, now with the advent of Commercial Law 2005 (from Articles 284 to Articles 291) Governmental Decree No. 35/2006/ND-CP, and Circular No. 09/2006/TT-BTM issued by the Ministry of Trade, a legal base of franchising is fundamentally set up. Nevertheless, several stipulations of such documents attract comments and criticism from the business circle, especially in the following issues…
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