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VN franchise rules under pressure to change

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At the end of the 1990s, franchise was still a strange concept to most people in Viet Nam.




There were no opportunities to enjoy or even see the products and services of the world’s well-known brands in Viet Nam.

KFC, McDonald, Starbucks and Lotteria were not familiar names for Vietnamese youth. However, this has changed.

Now, you can start a beautiful morning with friends at a Starbucks or enjoy lunch with family at a KFC or Lotteria outlet. You could also purchase the latest Nike or Adidas products as well as those of other world famous brands at stores in Viet Nam.

This change has been the result of a very effective business model – franchise. After 40 years of Doi moi (Renewal) and more than 19 years since its entry into the World Trade Organization (WTO), Viet Nam has emerged as one of the most attractive countries for investors and franchisors, with a population of over 90 million, 65 per cent of whom are under 35 years old, and a very dynamic consumer class with a strong preference for foreign brands.

Despite the global economic slowdown, thanks to its advantageous location, population size, and consumer habits, Viet Nam is now an ideal destination for many investors as well as franchisors.

According to the Vietnamese Ministry of Industry and Trade (MoIT), around 160 franchises have entered Viet Nam so far. This is just the franchises that are required to register with MoIT before officially commencing their operation pursuant to the 2005 Commercial Law.

The dominant business sectors for franchises are food services, retail, education, and entertainment. Food and beverage franchises account for 30 per cent of the registered franchises. The primary reason for the sustained increase in franchise activities in Viet Nam is the adoption of the 2005 Commercial Law and Decree 35/2006/ND-CP (later amended by Decree 120/2011/ND-CP), which, for the first time, provided a legal framework for franchising.

Foreign franchisors are required to register their franchising activities before granting franchises in Viet Nam. If they carry out their franchise activities in the country without a certificate of franchise registration, they will face administrative sanctions, including fines ranging from VND10 million to 20 million (approximately US$439-878).

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