Resolving International Franchise Contract Disputes in the F&B Sector in Vietnam

The franchise model in the international food and beverage (F&B) sector is becoming increasingly popular in Vietnam. However, behind the opportunity to rapidly expand a brand and boost profits lie numerous legal risks if the parties involved do not clearly understand their rights and obligations under the franchise agreement. This article shares the latest legal updates, common disputes, and effective solutions for resolving international F&B franchise contract disputes in Vietnam.

1. Latest Legal Regulations Governing Franchise Contracts in Vietnam

In Vietnam, franchise contracts are primarily governed by the 2005 Commercial Law, though many specific provisions are further clarified through sub-law documents.

Currently, Decree No. 35/2006/ND-CP remains the foundational regulation guiding franchise activities. However, businesses should pay special attention to Circular 03/2024/TT-BCT and Consolidated Document 14/VBHN-BCT issued in 2024. These two updated documents clarify important matters such as franchise registration requirements, changes to franchise information, and the responsibilities of parties during contract execution.

Additionally, if the franchise contract involves foreign elements, the application of international or foreign law, or the selection of an international arbitration body, must be clearly agreed upon from the outset.

2. Common Disputes in International F&B Franchise Contracts

Below are some common types of disputes encountered by Vietnamese companies receiving franchises from international brands:

Disputes over technical support, training, and supply of materials.

Many local F&B companies report that franchisors fail to deliver on commitments—for example, not providing original recipes, using substandard ingredients, offering inconsistent store designs, or providing poor training programs.

Disputes over franchise fees and recurring charges.

Fixed fees or revenue-based percentages may not suit the Vietnamese market, especially amid economic fluctuations such as pandemics or rising ingredient costs. This creates financial pressure for franchisees.

Disputes over intellectual property rights after contract termination.

Franchisees sometimes continue to use the brand, logo, or trade secrets after the contract expires—leading to serious legal consequences.

Disputes over transfer to third parties.

When a franchisee wishes to transfer rights to a third party but is blocked by the franchisor without a clear reason or contractual clause, disputes can escalate.

Disputes related to force majeure events.

Unforeseen events such as COVID-19, natural disasters, or import restrictions can disrupt business. Without proper contractual provisions for such events, parties may become deadlocked.

3. Dispute Resolution Methods – Choosing the Right Path in Vietnam

Depending on the contract terms and the level of cooperation between parties, businesses can consider the following dispute resolution methods:

Negotiation & Internal Mediation:

This should be the first choice if parties remain cooperative. It saves costs and preserves long-term relationships. However, for enforceability, results must be documented clearly in writing.

Commercial Arbitration:

If the contract includes an arbitration clause, parties can opt for the Vietnam International Arbitration Centre (VIAC) or an overseas arbitration body if international elements are involved. Arbitration offers speed and confidentiality but may incur higher costs than court proceedings.

Filing a lawsuit in Vietnamese courts:

If there is no arbitration agreement or if the contract is unclear, the competent court is the final recourse. Court judgments are enforceable, especially if the franchisor has operations or assets in Vietnam. However, litigation may be lengthy and publicly disclose dispute details.

4. Key Considerations When Drafting Franchise Contracts

To avoid disputes, businesses should be proactive during contract drafting. Key points include:

• Clearly define standards for product quality, store design, materials, and training methods.

• Specify all fees (initial, recurring, marketing) and mechanisms for adjustment in fluctuating markets.

• Include detailed force majeure clauses to handle unexpected events like pandemics or natural disasters.

• Protect intellectual property rights: outline usage rights and obligations to cease use upon termination.

• Clearly state applicable law, contract language, and dispute resolution mechanisms—especially when foreign elements are involved.

5. Conclusion

Resolving international franchise contract disputes in the F&B sector in Vietnam requires not only deep legal understanding but also clear strategy and practical experience. With updated legal regulations and an increasingly professional legal environment, businesses can fully protect their interests with careful preparation from the outset.

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