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September 13, 2013

Asia IP Explores the Growth of Franchising in ASEAN

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Asia IP

In the latest edition of Asia IP, lawyers from across ASEAN explain why franchising has become such a popular way of doing business in the region. Lawyers from Tilleke & Gibbins were among some of the contributors, including Alan Adcock, partner and deputy director of intellectual property in Bangkok; Thomas J. Treutler, partner and managing director in Vietnam; and Thom Thi Mai Nguyen, attorney-at-law in Hanoi.

Commenting on the growth of franchising in Thailand, Alan is quoted as saying the country’s franchise businesses grew by 20% in 2012, in part due to the fact that “Thailand currently has no franchise-specific legislation.” Similarly, he notes, “As there are no specific franchising regulations in Cambodia currently, the time is now for foreign franchisors to enter the market,” and indeed, the country is seeing a gradual increase in franchise operations. He warns, however, that “Intellectual property rights infringement is an area of particular risk, and thus, franchisors should protect themselves with clear and robust language in the franchising agreement.” In addition, he says, they should contain anticompetition clauses that run beyond the lifetime of the franchise agreement, because “an ex-franchisee could take the knowledge and experience he gained from running the franchise operation and open a competitive business or franchise.”

The article goes on to discuss franchising in Vietnam, quoting Thomas as saying, “Franchising is not very common in Vietnam, but it is becoming more familiar. Most franchises in Vietnam are for foreign brands, and a majority of such foreign brands are in the food and beverage and fashion sectors.” To those thinking about setting up a franchise in Vietnam, Thom provides some cautionary advice, saying “Many different regulations may affect the terms and conditions of a franchise agreement; for example, a foreign franchisor normally wishes to put a purchase option in the franchise agreement which gives the foreign franchisor a priority right to acquire the franchised system in Vietnam.” She continues to say, “However, this may not be feasible due to the foreign ownership restrictions in the retail sector.” This may result in the foreign franchisor’s registration being rejected by the licensing authorities, and they will not be allowed to have full ownership of the developed franchised system.

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