The one-year rule: why a new company may not be able to franchise in Vietnam

What the law says

A business system may be franchised only after it has operated for at least one year.Source: Decree 35/2006 consolidated text, VBHN 15/VBHN-BCT (Ministry of Industry and Trade) (25 Apr 2014) · Tilleke & Gibbins, on Decree 08/2018 (16 Jan 2018)

How MOIT applies it

Tilleke & Gibbins reports that MOIT usually reads the rule as applying to the franchisor entity itself. In their example, a regional franchisor set up in Singapore needed to have existed for more than a year, even though the brand was much older.Source: Tilleke & Gibbins (24 Jul 2018)

A newly incorporated master franchisee or regional holding company that applies to sub-franchise is therefore likely to be rejected, although MOIT decides case by case.Source: Tilleke & Gibbins (24 Jul 2018)

How brands plan around it

If you plan to franchise into Vietnam through a new regional company, incorporate it early, or have an existing entity with more than a year of operation sign as franchisor. If a Vietnamese master franchisee will sub-franchise, check how long its own company has existed before you agree a sub-franchising timetable.

Note that Tilleke's guidance dates from 2018. The rule itself has not changed since, but confirm current MOIT practice with counsel before you structure the deal.Source: Tilleke & Gibbins (24 Jul 2018)