Support Vietnamese enterprises to understand distribution processes and market demand in the EU and to adjust to such processes and demand Activity: ICB-14 REGULATORY REVIEW OF VIETNAMESE LEGISLATION ON FRANCHISING Authors: Andras LAKATOS Pham Nguyen Minh Tran Thi Thu Phuong September 2015 This Report was developed with the support from the European Union. The opinions conveyed herein are those of the author, not that of the European Union nor the Vietnamese Ministry of Industry and Trade 2 TABLE OF CONTENTS List of acronyms.................................................................................................................................................. 4 1. Introduction ................................................................................................................................................ 5 2. The origin and evolution of Franchise Regulation in Viet Nam ........................................... 7 2.1. The first stage of franchising in Viet Nam ............................................................................ 7 2.2 Current situation of commercial franchising...................................................................... 8 2.3 Development prospects ............................................................................................................. 10 3. Description and legal / regulatory analysis of the current FranchiseRegulation ...... 10 3.1 Past regulations (before 2006) ............................................................................................... 10 3.2 Current franchise regulation ................................................................................................... 12 3.2.1 Overview of Vietnam’s franchise law in the international context .................... 12 3.2.2 Structure of Vietnam’s franchise law .............................................................................. 14 3.2.3 The core provisions of Vietnam’s franchise law......................................................... 15 3.2.3.1 The definition of franchising ..................................................................................... 15 3.2.3.2 Prerequisites .................................................................................................................... 17 3.2.3.3 Pre-contractual requirements .................................................................................. 18 3.2.3.4 The Franchise Contract ............................................................................................... 22 3.2.3.5 In-term relationship/conduct issues ..................................................................... 24 3.2.3.6 Registration requirement ........................................................................................... 25 3.2.3.7 Reporting requirement ................................................................................................ 27 3.2.3.8 Sanctions ............................................................................................................................ 27 3.2.3.9 Administration ................................................................................................................ 27 3.3 Vietnam's international commitments on franchising services ............................... 28 3.4 Analysis of the current franchise regulation .................................................................... 28 4. Assess the positive impact on the economic and social Vietnam since the promulgation and enforcement of legal documents related to franchise ............................... 30 5. Problems and challenges .................................................................................................................... 31 5.1 Problems encountered by governmental bodies in implementing the current Franchise Regulation ................................................................................................................................. 31 5.2 Problems encountered by foreign and Vietnamese franchisors / sub- franchisors and franchisees with respect to current Franchise Regulations .................... 32 6. Best practices in international franchise regulations ............................................................. 34 6.1 FDD content .................................................................................................................................... 35 6.2 Sanctions of non-compliance with disclosure requirements .................................... 38 6.3 Timing of disclosure requirements....................................................................................... 39 6.4 Standard clauses in franchise contracts ............................................................................. 40 6.5 Minimum Term .............................................................................................................................. 40 6.6 Registration requirements ....................................................................................................... 41 7. Country case studies ............................................................................................................................. 42 7.1 Australia ........................................................................................................................................... 42 7.1.1 Definition of franchising ....................................................................................................... 42 7.1.2 Pre-contractual requirements/FDD ................................................................................ 43 7.1.3 The Franchise Contract ......................................................................................................... 44 7.1.4 In-term relationship/conduct issues .............................................................................. 44 7.1.5 Registration requirements .................................................................................................. 45 7.1.6 Reporting requirements ....................................................................................................... 45 7.1.7 State administration ............................................................................................................... 45 7.1.8 Enforcement/Sanctions ........................................................................................................ 46 7.2 Brazil .................................................................................................................................................. 46 3 7.2.1 Definition of franchising ....................................................................................................... 46 7.2.2 Pre-contractual requirements/FDD ................................................................................ 46 7.2.3 The Franchise Contract ......................................................................................................... 48 7.2.4 In-term relationship/conduct issues .............................................................................. 48 7.2.5 Registration requirements .................................................................................................. 48 7.2.6 Reporting requirements ....................................................................................................... 48 7.2.7 State administration ............................................................................................................... 48 7.2.8 Enforcement/Sanctions ........................................................................................................ 48 7.3 Indonesia .......................................................................................................................................... 49 7.3.1 Definition of franchising ....................................................................................................... 49 7.3.2 Pre-contractual requirements/FDD ................................................................................ 49 7.3.3 The Franchise Contract ......................................................................................................... 50 7.3.4 In-term relationship/conduct issues .............................................................................. 51 7.3.5 Registration requirements .................................................................................................. 52 7.3.6 Reporting requirements ....................................................................................................... 53 7.3.7 State administration ............................................................................................................... 53 7.3.8 Enforcement/Sanctions ........................................................................................................ 53 7.3.9 Trade regulations in franchising ....................................................................................... 53 7.4 The Philippines .............................................................................................................................. 55 7.4.1 Definition of franchising ....................................................................................................... 55 7.4.2 Pre-contractual requirements/FDD ................................................................................ 56 7.4.3 The Franchise Contract ......................................................................................................... 56 7.4.4