The lack of a legal framework makes Vietnam less attractive in the eyes of franchisors, experts say.

Though the franchise has been legalized in Vietnam with the regulations stipulated in the Civil Code, Commercial Law and the Law on Technologies Transfer, the legal framework still has not kept pace with the development of franchising activities in the country. The lack of a completed legal framework on franchises has hindered the development of the franchising market in Vietnam.

Under the current rules, the franchisors must do business in these ways one year at least before they can expand their business in Vietnam. The regulation can affect the competitiveness and the plan to expand business scope of foreign investors, according to Ngo Duong Hoang Thao, Chairman of the Vietnam Franchise Club.

Mr Thao said that no other countries set up such a regulation on franchisors. If the investors have capabilities, they can expand their network to conquer the market in the first days of operation. The success or failure of a franchise deal depends on many factors, including the national policies and cultural bias.

He said that many big franchisors want to enter Vietnam after the country joins WTO, however, they still hesitate due to the lack of the legal framework for franchising activities. “The implementation of the intellectual property (IP) is a problem, as franchising has a strong attachement to the IP rights,” Mr Thao said, adding that though Vietnam has made commitments relating to IP right protection, but it will take time to implement.

Ho Huu Hoanh from VietLotus Pte also said that there are many issues the current legal documents do not mention. For example, involved parties do not know to which agencies they have to make registration to if they want to give and receive franchise from export processing zones (EPZ) or non-tariff areas to Vietnam. In addition, there are no regulations on appealing and complaint settlment in case businessmen are refused to register franchising activities.

Up to now, the Ministry of Finance has not set the regulations on the fees that businessmen have to pay when making franchise registration, Mr Hoanh said, stressing that this is the work that needs to be done immediately.

Source: VNE