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January 16, 2018

New Decree Concerning Franchising Issued in Vietnam

Since the Ministry of Industry and Trade (MOIT) introduced its roadmap on simplification of business and investment requirements last September (Decision No. 3610a/QD-BCT dated September 20, 2017), it has been an open question whether the franchise registration requirement would still be applied to foreign franchisors. The language of Decision No. 3610a suggested that the statutory obligation to register before conducting any franchise activities in Vietnam might be removed, which would have been welcome news to many foreign franchisors as registration can be burdensome and time-consuming.

On January 15, 2018, the Vietnamese government issued Decree No. 08/2018/ND-CP amending a number of decrees related to investment conditions under the MOIT’s supervision (“Decree 08”). The goal of Decree 08 is to reduce administrative procedures and make doing business easier, and it provides a wide range of amendments of investment conditions imposed on enterprises in many important trade areas such as oil and gas, tobacco, electricity, and franchising. Decree 08 took immediate effect upon issuance.

Franchise regulations are governed by Decree No. 35/2006/ND-CP, dated March 31, 2006 (“Decree 35”). Decree 08 modifies Section 1 of Decree 35, “Conditions for Franchising,” by reducing the conditions applicable to foreign franchisors (Article 5), abolishing the conditions applicable to franchisees (Article 6), and removing the restriction on goods and services permitted for franchising (Article 7).

As a result, under Decree 08, the statutory conditions that a foreign franchisor needs to satisfy have been reduced to one: that its franchise system must have been operating for at least one year. However, other provisions on franchising, notably including franchise registration requirements, still remain. The MOIT generally interprets these amendments to be easing business conditions for franchisees, but not for franchisors. In other words, foreign franchisors still need to register with the MOIT before conducting franchising activities in Vietnam.

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