Decree No. 35/2006/ND-CP about franchising

This Decree details the provisions of the Commercial Law 2005 on franchising.

DECREE

DETAILING IMPLEMENTATION OF COMMERCIAL LAW 2005 REGARDING FRANCHISING

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;
Pursuant to the Commercial Law 2005 dated June 14, 2005;
At the proposal of the Minister of Trade,

HEREBY DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree details the provisions of the Commercial Law 2005 on franchising in the territory of the Socialist Republic of Vietnam.

Article 2. Subjects of application

1. This Decree applies to Vietnamese traders and foreign traders involved in franchising.

2. Foreign-invested enterprises engaged in goods purchase and sale and activities directly related to goods purchase and sale, apart from the provisions of Article 7 of this Decree, shall only be allowed to conduct franchising for goods items of which they are licensed to provide services of distribution according to Vietnam's international commitments.

Article 3. Interpretation of terms

In this Decree, the terms below are construed as follows:

1. ''Franchisor" means a trader that grants commercial rights, including also the secondary franchisor in relation to the secondary franchisee.

2. "Franchisee" means a trader that receives commercial rights, including also the secondary franchisee in relation to the secondary franchisor.

3. ''Secondary franchisor means a trader that is entitled to sub-franchise commercial rights it has received from the primary franchisor to the secondary franchisee.

4. ''Primary franchisee" means a trader that receives commercial rights from the primary franchisor. The primary franchisee shall be the secondary franchisor defined in Clause 3 of this Article in relation to the secondary franchisee.

5. ''Secondary franchisee" means a trader that receives commercial rights from the secondary franchisor.

6. ''Commercial rights" include one, several or all the following rights:

a) Right granted to the franchisee by the franchisor that also requests the franchisee to undertake by itself the business of supplying goods or providing services within a system set up by the franchisor and associated with the franchisor's trademark, trade name, business slogan, business and advertising logo;

b) Common commercial right granted by the franchisor to the primary franchisee.

c) Right sub-granted by the secondary franchisor to the secondary franchisee under the common franchising contract.

d) Commercial right granted by the franchisor to the franchisee under the commercial right development contract.

7. ''Business by mode of franchising" means business activities conducted by the franchisee under the franchising contract.

8. ''Commercial right development contract" means a franchising contract whereby the franchisor grants the franchisee the right to set up more than one establishment to do business by mode of franchising in a specified geographical area.

9. ''Common commercial right" means the right granted by the franchisor to the secondary franchisee, permitting the latter to sub-grant commercial rights to secondary franchisees that are not permitted to further grant such common commercial right.

10. ''Secondary franchising contract" means a franchising contract signed between the secondary franchisor and the secondary franchisee regarding common commercial rights.

Article 4. Powers to perform the state management of franchising

1. The Ministry of Trade shall be answerable to the Government for performing the function of state management of franchising nationwide and have the following duties and powers:

a) To perform the unified professional management and provide guidance for realization of policies and provisions of law on franchising; to organize the registration of franchising;

b) To assume the prime responsibility for, and coordinate with ministries, ministerial-level agencies, Government-attached agencies and provincial/municipal People's Committees in, inspecting, controlling, assessing and reporting to competent superior authorities on franchising;

c) To propose to the Government for promulgation or promulgate according to its competence or propose amendments and supplements to legal documents on franchising.

2. The Ministry of Finance shall, within the ambit of its duties and powers, have to guide the tax regime applicable to franchising and the fee for registration of franchising.

3. Ministries, ministerial-level agencies and Government-attached agencies shall perform the state management of franchising within the ambit of their respective tasks and powers.

4. Provincial/municipal People's Committees shall have responsibilities:

a) To perform according to their competence the state management of franchising;

b) To direct provincial/municipal Trade Services and Tourism Services in organizing the registration of franchising according to their competence, periodically inspecting, controlling and reporting to the Ministry of Trade on franchising in their respective localities.

Chapter II

FRANCHISING

Section 1. CONDITIONS FOR FRANCHISING

Article 5. Conditions for the franchisor

A trader shall be permitted to grant commercial rights when fully satisfying the following conditions:

1. The business system intended for franchise has been in operation for at least one year.

Where a Vietnamese trader is the primary franchisee of a foreign franchisor, such Vietnamese trader must conduct business by mode of franchising for at least one year in Vietnam before sub-franchising.

2. Such trader has registered franchising with the competent agency defined in Article 18 of this Decree.

3. The in-business goods and/or services covered by commercial rights do not violate the provisions of Article 7 of this Decree.

Article 6. Conditions for the franchisee

A trader shall be permitted to receive commercial rights when having the registration of business lines subject to commercial rights.

Article 7. Goods and services permitted for franchising business

1. Goods and services permitted for franchising business are those not on the list of goods and services banned from business.

2. Enterprises shall be permitted to deal in goods and/or services on the list of goods and services restricted from business or those on the list of goods and services subject to conditional business only after being granted business licenses or papers of equivalent value by the branch-managing agencies or fully satisfying business conditions.

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Chapter III

IMPLEMENTATION PROVISIONS

Article 27. Transitional provisions

Franchising activities conducted before the effective date of this Decree must go through procedures for registration according to the provisions of this Decree within 3 months after such effective date.

Article 28. Implementation effect

1. This Decree takes effect 15 days after its publication in CONG BAO. To annul all previous stipulations on franchising which are contrary to the provisions of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies and presidents of provincial/municipal People's Committees shall guide and implement this Decree.