Changes to Franchising Regulation: To Register or Not to Register?
On 15 January 2018, the Government issued Decree No. 08/2018/ND-CP (Decree 08) abolishing numerous business requirements under the administration of the Ministry of Industry and Trade, with the aim to lift various administrative burdens that have long been imposed on local businesses.
Amongst other areas, franchising is one of the focuses of Decree 08. Franchising is currently regulated under Decree No. 35/2006/ND-CP, as amended by Decree No. 120/2011/ND-CP (Decree 35). Article 5 (regarding "The Requirements for Franchisor"), Article 17 (regarding "Registration of Franchising Activity") and Article 17a (regarding "Franchising Exempted from Registration") of Decree 35 require a foreign franchisor to register its franchising activities with the Ministry of Industry and Trade before commencing the franchise(s).
Now, Decree 08 has abolished the registration requirement under Article 5. At first glance, this can be interpreted to mean that a franchisor is no longer required to have its franchising operation registered. However, Decree 08 does not touch Articles 17 and 17a, which also impose the registration requirement on foreign franchisors. Because Articles 17 and 17a remain intact, it is unclear, with the inception of Decree 08, whether franchising registration is still mandatory for foreign franchisors. Nevertheless, strictly speaking, because Articles 17 and 17a have not been removed, it is arguable that foreign franchisors must still register franchises in Vietnam.
In any case, this seems to be a serious inconsistency put forth by Decree 08. In the coming time, the Ministry of Industry and Trade may have to issue a guiding circular to clarify whether a registration remains compulsory for a franchisor.
Decree 08 takes effect from 15 January 2018.