Franchise activities in Vietnam are primarily governed by the Commercial Law and related regulations. Under these provisions, a franchisor must operate a business model that has been active for at least one year and must register its franchise with the Ministry of Industry and Trade, unless otherwise exempted.

A franchise agreement must be made in writing and include key terms such as the rights and obligations of both parties, intellectual property ownership, fees, and territorial rights. The franchisee must also receive a disclosure document at least fifteen working days before signing, allowing them to assess the business, costs, and potential risks.

However, legal disputes in franchising often arise when the agreement does not clearly define responsibilities. If the franchisor fails to provide sufficient training, operational support, or consistent quality control, the franchisee may experience financial losses, while the franchisor’s brand reputation can be seriously harmed. Conversely, if the franchisee violates operational standards or uses the brand beyond the agreed scope, the franchisor faces risks of brand dilution, customer complaints, and even regulatory sanctions.

Unclear clauses on performance obligations, termination, and compensation can also lead to disputes. Without specific provisions on dispute resolution, enforcement, and post-termination duties, both sides may face lengthy legal proceedings and financial uncertainty. In some cases, especially when foreign parties are involved, these ambiguities can result in cross-border enforcement difficulties and brand damage.

Therefore, it is essential that every franchise agreement clearly defines each party’s obligations, reporting mechanisms, and supervision processes. Both sides should ensure transparency in fees, consistent quality standards, and protection of intellectual property rights. A well-drafted franchise agreement not only supports sustainable business expansion but also acts as a shield against commercial and reputational risks.

At Hnlaw, we emphasize the importance of legal due diligence and precise contract drafting before entering into any franchise relationship — because in law, prevention is always better than remedy.