The franchise model in the international F&B sector is becoming increasingly popular in Vietnam. However, behind the opportunity to expand the brand and quickly profit is a series of legal risks if the parties do not clearly understand their rights and obligations in the contract. In this article, we will share the latest legal updates, common disputes and effective and practical ways to resolve international F&B franchise contract disputes in Vietnam.
In Vietnam, franchise contracts are mainly governed by the 2005 Commercial Law, but many specific contents are updated through legal documents.
Currently, Decree No. 35/2006/ND-CP is still the fundamental document guiding commercial franchising activities. However, businesses need to pay special attention to Circular 03/2024/TT-BCT and Consolidated Document 14/VBHN-BCT in 2024. These are two important updated documents in 2024, clarifying requirements for registration, changing franchise information, and responsibilities of the parties during contract implementation.
In addition, if the franchise contract has foreign elements, the application of international law, foreign law or the choice of international arbitration also needs to be clearly agreed upon from the beginning.
Some typical types of disputes that businesses in Vietnam often encounter when receiving franchises from international brands:
Disputes over obligations for technical support, training and supply of materials.
Many domestic F&B businesses report that the franchisor does not support as committed - for example: not providing the original recipe, substandard input materials, inconsistent store design, and lack of quality training staff.
Disputes over franchise fees and recurring costs.
Fixed fees or percentages of revenue are sometimes not suitable for the Vietnamese market, especially when there are economic fluctuations such as epidemics, increased raw material costs, etc. This causes great financial pressure for franchisees.
Disputes over intellectual property rights after the contract terminates.
In many cases, the franchisee continues to use the brand, logo, and know-how after the contract expires - easily leading to serious litigation.
Disputes when the franchisee wants to transfer to a third party.
Unexplained refusals from the franchisor or without clear provisions in the contract lead to prolonged conflicts.
Disputes related to force majeure events.
Objective fluctuations such as the COVID-19 epidemic, natural disasters, import restrictions... cause business operations to be interrupted. If the contract does not have provisions to handle this situation, the parties can easily fall into deadlock.
Depending on the content of the contract and the level of cooperation of the parties, businesses can consider the following resolution methods:
Internal negotiation & mediation:
This is the first option that should be given priority if the parties are still willing to cooperate. This method helps save costs and preserve long-term relationships. However, to be binding, the conciliation results need to be made in writing with clear content.
Resolved in commercial arbitration:
If the contract has an arbitration clause, the parties can choose the Vietnam International Arbitration Center (VIAC) or a foreign arbitration organization if there is an international element. Arbitration has the advantage of speed and security but costs can be higher than in court.
Filing a lawsuit in Vietnamese Court:
If there is no arbitration agreement, or the contract is unclear, the Court of competent jurisdiction is the final place for resolution. This is a highly coercive option, especially if the franchisor has operations or assets in Vietnam. However, the proceedings can be lengthy and the content of the dispute public.
To avoid falling into disputes, businesses need to be proactive right from the contract drafting stage. Here are the points to note:
Detailed regulations on quality standards, design, materials, and training methods.
Clearly identify fees (initial franchise fee, recurring fees, marketing fees...) and adjustment methods if the market fluctuates.
The force majeure clause should be clearly stated to handle unexpected cases such as epidemics or natural disasters.
Protection of intellectual property rights: it is necessary to clearly stipulate the right to use and the responsibility to stop use upon termination of the contract.
Applicable law agreements, contract language and dispute resolution methods are clear, especially when there are foreign elements.
Resolving franchise contract disputes in the international F&B sector in Vietnam not only requires a deep understanding of the law but also requires a clear strategy and practical experience. With newly updated regulations and an increasingly professional legal environment, businesses can completely protect their rights if they are carefully prepared from the beginning.
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