Franchising is an attractive trend for domestic investors and foreign businesses. Understanding the legal regulations will ensure effective and safe participation in this field. This article will provide general legal information on franchising, thereby helping individuals and businesses understand the legal regulations and legal risks when participating in this business activity.

1. Concept of franchising

The concept of franchising is stipulated in Article 284 of the 2005 Commercial Law with the following specific contents:

- Franchising is a commercial activity in which the franchisor allows and requires the franchisee to conduct the purchase and sale of goods and provision of services on its own according to the following conditions:

+ The purchase and sale of goods and provision of services is conducted in a business organization manner prescribed by the franchisor and is associated with the trademark, trade name, business secrets, business slogan, business symbol, and advertisement of the franchisor;

+ The franchisor has the right to control and assist the franchisee in operating the business.

In addition, according to the provisions of Article 5 of Decree 35/2016/ND-CP, the franchised business system must operate for at least 01 year before being permitted to franchise.

2. Conditions for franchising

To be able to participate in franchising activities, it is necessary to register for franchising according to the provisions of Article 291 of the 2005 Commercial Law as follows:

- Before franchising, the intended franchisor must register with the Ministry of Trade.

- The Government shall specify in detail the conditions for doing business under the franchising method and the order and procedures for registering for franchising.

3. Rights and obligations of parties involved in franchising activities

According to the above provisions, franchising will include the franchisor and the franchisee.

3.1. Rights and obligations of the franchisor

Based on Articles 286 and 287 of the Commercial Law 2005, unless otherwise agreed, the franchisor has the following rights and obligations:

a) Regarding rights:

- Receive franchise fees;

- Organize advertising for the franchise system and franchise network;

- Periodically or suddenly inspect the activities of the franchisee to ensure the consistency of the franchise system and the stability of the quality of goods and services.

b) Regarding obligations:

- Provide guidance documents on the franchise system to the franchisee;

- Initial training and regular technical assistance to franchisees to operate in accordance with the franchise system;

- Design and arrange sales locations and service provision at the franchisee's expense;

- Ensure intellectual property rights for the subject matter stated in the franchise contract;

- Treat franchisees equally in the franchise system.

The franchisor plays a key role in building the foundation for the franchise system. In addition, the franchisor also assumes the responsibility for training, technical support and supervision to ensure consistency throughout the system, from products to services.

3.2. Rights and obligations of the franchisee

Pursuant to Article 288 and Article 289 of the 2005 Commercial Law, unless otherwise agreed, the rights and obligations of the franchisee are stipulated as follows:

a) Regarding rights:

- Request the franchisor to provide full technical assistance related to the franchise system;

- Request the franchisor to treat other franchisees in the franchise system equally

b) Regarding obligations:

+ Pay the franchise fee and other payments according to the franchise contract;

+ Invest in sufficient facilities, financial resources and human resources to receive the rights and business secrets transferred by the franchisor;

+ Accept the control, supervision and guidance of the franchisor; comply with the requirements on design, arrangement of sales locations and service provision of the franchisor;

+ Keep the franchised business secrets confidential, even after the franchise contract ends or is terminated;

+ Stop using the trademark, trade name, business slogan, business logo and other intellectual property rights (if any) or the franchisor's system when the franchise contract ends or is terminated;

+ Operate operations in accordance with the franchise system;

+ Not to re-franchise without the franchisor's consent.

Thus, the franchisee is the one who implements the values ​​and models that the franchisor builds. However, the franchisee must also strictly comply with the standards set by the franchisor. The success of the franchise store will also strengthen the position of the entire franchise system in the market.

The above are some legal regulations on franchising. This article is for informational purposes only, not for consulting purposes. If you need advice, please contact us via email: info@barrso.com