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Consulting on franchise contract
With the availability of customer information, as well as the high competitiveness of franchisors, startups form quickly and die quickly. So franchising is growing in popularity. Therefore, to start franchising, franchisees need to know about the franchise contract’s characteristics, content and template. Please refer to the article below to find out the answer for yourself.
What is a franchise agreement?
“Commercial franchising” is defined in Article 284 of the Vietnam Commercial Law 2005 as the franchisor’s permission to the franchisee to use trademarks, goods, business secrets, trade names, business logos, advertising, business slogans, etc. to carry out profitable business activities for themselves.
“Commercial franchising contract” means an agreement of the parties (the franchisor and the franchisee) on the creation, change or termination of the rights and obligations of the parties in the related contract. to franchise operations.
Conditions for franchising in Vietnam ?
Decree 35/2006/ND-CP stipulates very clearly the conditions for franchising which are:
- For the franchisor (Article 5): The business system intended to be used for franchising has been in operation for at least 01 year; In case a Vietnamese trader is a primary franchisee from a foreign franchisor, that Vietnamese trader must do business under the franchising method for at least 01 year in Vietnam before re-granting a commercial right; Having registered commercial franchising with a competent authority as prescribed in Article 18 of Decree 35/2006/ND-CP; Business goods and services subject to commercial rights do not violate the provisions of Article 7 of Decree 35/2006/ND-CP (for example, Goods and services permitted for commercial franchising does not include firecrackers, drugs, etc).
- For the franchisee (Article 6): quite simply, when the recipient has registered a business line suitable to the object of the franchisor.
Contents of a franchise contract in Vietnam ?
The law stipulates the basic contents required in franchising activities, so depending on the needs of the parties, the subject of the franchise contract can agree on additional terms. For each specific content, the parties can stipulate depending on the needs and will of the parties in the most reasonable way as long as they comply with the basic contents required by the law.
So according to Article 11 of Decree 35/2006/ND-CP of the Vietnamese Government, a franchise contract must have the following contents:
- Commercial rights: content about transferring anything, transferring all related to trademarks, business secrets, logos, etc., or partly transferring.
- Rights and obligations of the franchisor (specifically in Articles 286 and 287 of the 2005 Commercial Law)
- Rights and obligations of the franchisee (specifically in Articles 288 and 289 of the Commercial Law 2005)
- Prices, periodic franchise fees and payment methods: The law does not stipulate a fixed price for each product, but the parties can determine the price and payment fee based on the product’s reputation, franchise area, market demand… At the same time, choose a payment method in accordance with the terms of the Parties. Such legal provisions ensure that the management does not interfere deeply in the relationship between the parties at the macro level.
- Validity period of the contract: The law of Vietnam does not stipulate a term, but the contract term is determined by the parties themselves. In addition, Article 13 of Decree 35/206/ND-CP stipulates: The contract is applied in the cases mentioned in Article 16 of the Decree, i.e unilaterally terminating the contract. Decree 35 also stipulates the effective time of the contract in Article 14 to respect the agreement of the parties. Unless otherwise agreed, foreign trade agreements will take effect immediately after signing. In addition, it is also possible to determine the time to conclude the contract according to Article 404 of the Civil Code 2015. When the contract is terminated, the two parties can agree to extend the contract. At the same time, both parties may agree to terminate the Agreement prior to its expiration.
- Contract extension and termination: The parties terminate the franchise contract when the contract performance term ends but the parties do not renew the contract; the contract has not expired but the parties jointly choose to terminate the contract.
- Dispute resolution: Franchise contracts are a type of commercial contract, so the dispute resolution mechanism for them is the same as the dispute resolution mechanism for other commercial contracts. Article 317 of the Commercial Code 2005 stipulates the forms of commercial dispute settlement, including: Arbitration between parties selected by agencies, organizations or individuals and the parties agree to act as mediators; or settled in the Arbitral Tribunal or the Court. Enterprise law allows parties to foreign trade contracts to freely choose one of the four forms of dispute resolution mentioned above to resolve disputes that may arise during the contract performance.
Franchise contract service by Siglaw
Siglaw will provide customer with the following service:
- Free consultant 24/7 on matters relating to Franchise contract
- Advice from experts, lawyers with more than 10 years of experience in the field of franchise contracts
- Updating the procedure for customers step-by-step and as soon as possible
- Get the job done 100% on time
- And other advantages!
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