Protecting International Franchise Brands in Vietnam: Legal Guidance and Key Considerations for Foreign Investors

1. Franchising and the Role of Branding

Main table of contents

Franchising is one of the most popular forms of investment, enabling foreign investors to expand their presence in Vietnam by transferring business rights, management models, and most importantly, brand value. Within this model, the brand is the “soul” of the franchise system—both the element that attracts customers and the most critical intangible asset requiring protection.

However, Vietnam remains a developing market with a distinctive legal environment. In practice, many international brands face legal risks when implementing franchise models because they overlook the importance of registering, protecting, and managing their trademarks effectively.

2. Legal Framework Governing Franchising in Vietnam

Vietnam’s legal system on franchising has evolved through multiple legislative instruments:

Commercial Law 2005 (Articles 284 – 291): Establishes the fundamental legal framework for franchising activities.
Decree No. 35/2006/ND-CP and Decree No. 120/2011/ND-CP: Provide detailed regulations on conditions and procedures for franchising.
Decree No. 08/2018/ND-CP: Simplifies several business conditions, making franchising activities more accessible.
Intellectual Property Law 2005 (amended in 2009, 2019, 2022): Regulates the protection of trademarks, industrial designs, and trade secrets.

Accordingly, foreign franchisors must complete two key procedures when entering the Vietnamese market:

Register the franchise activity with the Ministry of Industry and Trade (before the first transfer of rights).
Register the brand, trademark, and intellectual property rights with the National Office of Intellectual Property (NOIP).

3. Common Legal Risks for International Franchise Brands

3.1. Trademark Preemption

Local partners or third parties may register a trademark in Vietnam before the foreign brand officially enters the market. This situation forces the rightful brand owner into disputes or even having to buy back their own brand at a significant cost.

3.2. Misuse of Branding by Franchisees

Franchisees may alter brand images, designs, or service quality, undermining brand reputation. Without clear contractual provisions on operational standards and monitoring mechanisms, brand protection becomes challenging.

3.3. Post-Termination Disputes

In cases where franchise agreements are terminated, franchisees may continue using the brand, business model, or trade secrets, causing serious damage to the franchisor.

4. Legal Guidance on Brand Protection in Vietnam

4.1. Early Trademark and IP Registration

Vietnam applies the “first-to-file” principle, meaning whoever registers first obtains legal protection, regardless of prior use abroad.
International franchisors should register trademarks, trade names, packaging designs, and slogans in Vietnam before negotiations or franchise agreements take place.

4.2. Drafting Comprehensive Franchise Agreements

Contracts should explicitly cover:

Scope of brand use.
Obligations to maintain service and product quality.
Monitoring, training, and audit mechanisms.
Termination conditions and remedies for breach.
Confidentiality clauses covering trade secrets, formulas, software, and customer data.

4.3. Franchise Registration with the Ministry of Industry and Trade

This is a mandatory step for legal recognition of franchise agreements in Vietnam. Without registration, contracts may be deemed invalid, creating difficulties in resolving disputes.

4.4. Active Monitoring of Franchise Operations

Franchisors should establish rigorous monitoring systems—such as regular inspections, performance reports, and customer surveys—to ensure brand consistency and safeguard reputation.

4.5. Choosing Appropriate Dispute Resolution Mechanisms

Contracts should include dispute resolution via international arbitration or the Vietnam International Arbitration Centre (VIAC). Arbitration ensures neutrality, professionalism, and suitability for cross-border disputes.

5. Special Legal Considerations for Foreign Investors

Restricted Sectors: Certain business sectors (e.g., education, retail distribution, logistics) are conditional for foreign investors. Franchisors must review sector restrictions under Vietnam’s WTO commitments and free trade agreements before proceeding.
Foreign Exchange and Payment Compliance: Franchise fees, royalties, and training costs must be processed through lawful foreign currency accounts in compliance with foreign exchange regulations.
Taxation: Franchise activities are subject to corporate income tax, value-added tax, and withholding tax on royalties for foreign franchisors. Tax planning should be integrated with legal advice.
Competition Law Compliance: Clauses restricting competition (e.g., exclusivity within certain territories) must comply with Vietnam’s Competition Law 2018.

6. The Role of Professional Legal Services

To safeguard brands effectively, foreign investors should seek support from experienced legal counsel in:

Intellectual property registration in Vietnam.
Drafting and negotiating franchise agreements aligned with both international practices and Vietnamese law.
Representing franchisors in registering franchise activities with the Ministry of Industry and Trade.
Advising on tax, foreign exchange, and lawful payment structures.
Resolving disputes through arbitration or court proceedings.

Protecting franchise brands in Vietnam goes beyond registering trademarks—it requires a holistic approach: timely IP registration – robust contractual drafting – active operational monitoring – appropriate dispute resolution mechanisms.

With thorough preparation and the support of experienced legal experts, foreign investors can confidently expand their franchise systems, unlock Vietnam’s market potential, and preserve long-term brand value.

📌 References

Commercial Law 2005
Intellectual Property Law (amended 2009, 2019, 2022)
Decree 35/2006/ND-CP; Decree 08/2018/ND-CP
Decree 120/2011/ND-CP
Competition Law 2018

La Défense Vietnam Law Firm is a highly experienced legal practice specializing in the protection of international franchise brands within Vietnam. With a deep understanding of the complexities surrounding intellectual property rights and franchise laws, we offers tailored legal solutions to safeguard the interests of global brands operating in the Vietnamese market.

Leveraging extensive industry knowledge and a commitment to excellence, La Défense provides comprehensive services, including trademark registration, dispute resolution, compliance guidance, and enforcement of intellectual property rights. Our expertise ensures that international franchises can navigate the regulatory landscape effectively while maintaining their brand integrity.

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