As of mid-2018, more than 200 franchises had been registered in Vietnam, including franchises in food and beverages, fashion, education, and other sectors. With half of its population of nearly 100 million under the age of 30, Vietnam is one of the fastest growing franchise markets in the world.
Before entering Vietnam, foreign franchisors should have a solid understanding of the country’s franchising regulations and practice. Below, we answer 10 questions commonly asked by prospective franchisors.
1. Are franchises required to be registered in Vietnam?
Foreign franchisors in any business sector must register their franchising activities with Vietnam’s Ministry of Industry and Trade (MOIT) before conducting franchising activities in Vietnam. A Franchise Disclosure Document (FDD), which includes information about the franchisor, costs and fees payable by the franchisee, and other relevant matters, must be filed with the MOIT as part of the registration process. In practice, registration with the MOIT typically takes about one to two months from the date of submitting a duly prepared application dossier.
Domestic franchisors do not need to register, but are required to notify their local Department of Industry and Trade of their activities.
2. We just set up a Singaporean company to act as the master franchisee for the Asia-Pacific region. Can it act as the master franchisee even if it was just set up last month?
The Vietnamese franchise regulations require that a franchise system must have been in operation for more than one year prior to franchising such system in Vietnam. However, in its current practice, the MOIT usually interprets this one-year qualification to mean that the local franchisor entity (the Singaporean company, in this case), as opposed to the franchise system, must have been in operation for more than one year. Thus, if the proposed master franchisee (sub-franchisor) has only been established for one month, the MOIT is likely to reject the registration, though they will consider each application on a case-by-case basis.
3. Are there any pre-disclosure requirements for franchisors in Vietnam?
Prospective franchisees are supposed to be given at least 15 days to review the FDD before the date of entry into the franchise agreement.
4. We are in a hurry to sign the franchise agreement, can the pre-disclosure requirements be waived?
In practice, some franchisees will sign an agreement to waive the 15-day pre-disclosure requirement. However, it is recommended that the FDD be provided to the potential franchisee before or at the signing of the franchise agreement.