International Franchise & Business Opportunities May 28, VCI Legal Award-winning expertise with practical insights

Transcription

1 International Franchise & Business Opportunities May 28, 2014 VCI Legal Award-winning expertise with practical insights Tuan A. PHUNG Esq. Managing Partner VCI Legal Hon. General Consul Finnish Consulate HCMC Vice Chairman VAFI Vietnam Association of Financial Investors

2 Business Law Firm providing In-house Counsel Service, specialized legal services for business and some Key Practice Areas Corporations, M&A & Securities Investment and restructuring Banking, Finance & Capital Markets Insurance Real Estate & Construction Petroleum, Mining & Energy Infrastructure, Transport & Logistics Trade Policy & Competition Tax & Transfer Pricing Labor, HR Management & Compliance Alternative Dispute Resolution: Mediation, Arbitration

3 A full service law firm with a seasoned team of multi-disciplinary professionals in-depth understanding of the legal system, business environment, and cultural background in Vietnam. Offices: Hanoi and Ho Chi Minh City Fee earners: 25 Languages: Vietnamese, English, Japanese, French, Chinese, Korean

4 Legal 500, Chambers & Partners, IFLR 1000 and Legalese s Tax Director Handbook (global legal directories & ranking agencies) and international professional magazines list VCI Legal among the top law firms in Vietnam for: M&A, competition laws, banking and corporate, insurance, taxation, intellectual property, investment, Acquisition International Magazine: Vietnam Corporate Law Firm of the Year , M&A Vietnam Law Firm of the Year 2013, Real Estate Law Firm of the year ACQ Global Magazine: Vietnam Banking & Finance Law Firm of the Year Vietnam Capital Markets Law Firm of the Year Vietnam Corporate Law Firm of the Year Vietnam M&A Law Firm of the Year Financial Monthly Law Firm of the Year Corporate LiveWire M&A Vietnam Law Firm of the Year

5 Full-service business law firm: businessoriented approach to meet our clients needs: Finance, Legal & Stock Market Engineering Service Investment Structuring & Placement Legal, Compliance & Risk Management Service ; Intellectual Properties Strategic Management Service IP Enforcement Service

6 SERVICE OVERVIEW 1 Local Insights Meet International Expertise Corporate, Finance, Tax and Litigation on the In-house Counsel Services platform Legal and Financial Advisory Services Project and Contract Negotiation Drafting & Translation Due Diligence Registration procedures State & Local Government Relations Regulatory Compliance In-house training & workshops Project Planning and Management Daily Operations

7 A Can Do Attitude combining with a Know How Capacity True sense of Lawyer for business independent legal professionals who were trained & practiced in international environment Most key personnel are lawyers with in-house counsels experience and deep local business insights, Not only legal practitioners but also business managers who are willing to bring some skin in the game ; Strong professional & cultural background; Committed to provide not only the best legal services but also the most effective & practical business solutions; Team player and partnering with clients in resolving business issues

8 INTRODUCTION Past 10 years, Vietnam has been one of the most attractive countries in the world in term of retails markets. New regulation to boost foreign investment in retail First booming of Franchise Business in 2009 Franchise business Model has developed quickly since then Good method for small and medium size entrepreneurs who want to start a business in a short period of time Franchising offers: Limited risk of investment Proven track record of success

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10 GOVERNING LAWS Local Insights Meet International Expertise Franchising a business involves many laws (sometimes inconsistent) 1. Commercial Law of Civil Code of Contract Law 4. Competition Law (Anti-trust) 5. Consumer Protection Laws 6. Real Estate Law 7. Intellectual Property Law amended in Circular 08/2013/TTBCT 9. Decree 120/2011/ND-CP 10. Decree 35/2006/ND-CP 11. Circular 09/2006/TT-BTM 12. And more 10

11 WHAT IS A FRANCHISE? A right or a license (a business privilege ) granted by one party (franchisor) to another party (franchisee) Allows franchisee to sell certain goods or services using the business model or system, trademark, and goodwill of the franchisor Franchisor maintains some control and provides assistance to the franchisee. More complicated than a simple agency, distribution or licensing arrangement. Involve management, training & ongoing marketing supports

12 TYPE OF FRANCHISE Direct franchise: One layer franchisor - franchisee Indirect Franchise: 1. MASTER FRANCHISEE The master franchisor gives the franchisee the right to act as a sub-franchisor and grant a franchise to a sub-franchisee. 2. SUB-FRANCHISEE Rights received by a subfranchisee from a sub-franchisor under a master franchise agreement

13 TYPES OF FRANCHISING AGREEMENTS Franchise Agreement: franchisor - franchisee Master Franchise Agreement: between franchisor and master franchisee Sub-Franchise Agreement: between master franchisee and subfranchisee

14 STATUTORY CONDITIONS-1 Franchise Agreements must be in writing & registered to be effective No time limitation for a franchise agreement but limitation for trademark license ( 10 years) Franchisee must be a registered entity in Vietnam Contracts must be translated into Vietnamese Translation does not apply to franchise agreement under which a Vietnamese franchisor grants a franchise in a foreign Country. 14

15 STATUTORY CONDITIONS-2 Master Franchise agreement: Foreign law may govern Sub-franchising and other conditions One-year rule for sub-franchising: Local franchisee that receives a franchise from abroad cannot sub-franchise unless it has run the business for more than 1 year Purpose to ensure good development if the franchise network Economic needs test may apply

16 REGISTER A FRANCHISE Franchises from overseas, an export processing zone, a non-tariff area or a separate custom area Registration with the Ministry of Trade and Industry (MOIT) or Services of Industry and Trade (SOIT). The MOIT may determine at its own discretion if the documents submitted meet the disclosure requirements.

17 REGISTRATION REQUIREMENTS Master franchisors & sub-franchisors must register before conducting business Registration dossiers: Application Form Franchise Business Introduction (equivalent to UFOC) Certified Copy of the Business license Certified copy of the Franchisor s patents and IPR certificates Document of the master/primary franchisor permitting the subfranchise (if applicant is a master franchisee/sub-franchisor). Documents above must be translated into Vietnamese The franchise Agreement itself doesn t need to be included except if needed for IPR registration associated with the franchise business 17

18 TIME FRAME & REGISTRATION FEES Time frame Legal : 5 days from the date the dossier is submitted In Practice may be longer Registration Fees: New registration: VND 16,500,000 Amendment of a franchise registration: VND 6,000,000 re-issuance of a franchise registration: VND 500,000

19 DISCLOSURE OBLIGATIONS Franchise Business Introduction (equivalent to UFOC): Disclose extensive information about the franchisor and the franchise organization Intended to give the potential franchisee enough information to make educated decisions about their investment Includes business experience of the franchisor s management team, litigation history, initial cost of investment, IPR, franchisor s obligations... Obligation to report the MOIT Significant Changes related to the franchise system - 19

20 REPORTING OBLIGATIONS A Vietnamese franchisor doesn t have to register it s franchising activities even if the franchisee is a foreigner. BUT a Vietnamese franchisee must report its Franchising Activities with the provincial SOIT where it is registered to operate. No specific content and procedure to fill the report Currently no strict enforcement

21 TAX CONSIDERATIONS Local Insights Meet International Expertise Personal income tax, (EIT Earned Income Tax) Transfer pricing Foreign Contractors: combined of CIT & VAT Value Added Taxes Corporate Income Taxes Customs Duties Personal Income Taxes Applicable tax jurisdictions: Home & host tax laws Avoiding Double Tax Agreements

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23 BENEFITS TO FRANCHISORS Control of brand, system, quality Increase brand value Rapid growth No investments in new outlets & staff Royalties and other fees 23

24 BENEFITS TO FRANCHISEE Relatively quick start-up time Brand recognition and goodwill without investment & long time spent for brand building A proven system or model of business with Training & Management already formed Reliable supply lines - assistance from franchisor Benefit from franchisor s improvements

25 DOWN SIDES Can be expensive Franchise fee Royalties Advertising Training Supplies Supply chain complication Reputational risk Lack of total control (both sides)

26 DON'T S for Franchisor Develop Franchise System when there is a lack of conditions or control IPRs are not registered & protected according to the laws Violation: Registration & Operation Announcement 26

27 DON'T S for Franchisee Franchisors don t provide adequate information about binding conditions and business potential Lack of knowledge about operation of the system, trained staffs Lack of data and understanding conditions for franchisee Don t abide by franchise conditions BOTH PARTIES FAIR AND COOPERATIVE Avoid unrealistic expectations and being greedy with the model franchise 27

28 CONCLUSION Local Insights Meet International Expertise Vietnam s legal framework is evolving to encourage retail activities, including franchising. Vietnam continues to come closer to the international norm but still a long way to go Today there is intense local interest among both large and small entrepreneurs to be a franchisee of an international franchisor BUT franchise business is NOT a free lunch for all, it s a LOT of HARD WORKS & DIFFICULTIES than it looks more and more the big boys game Franchise business is HERE TO STAY CASE STUDIES: Trung Nguyen, Pho 24, Baskin Ronbin, Pizza Hut, Lotteria, KFC, Starbuck, Mc Donald

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30 Tuan A. Phung Esq. Managing Partner Corporate & Legal Le Trong Nhi Managing Director Banking & Capital Markets Kent Wong Esq. Partner Head of Banking & Capital Markets Copyright 2009 Tuan Phung/VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

31 Thanh Q. Duong Esq. Managing Counsel DRP Head Hanoi Thang Dang Esq. Of Counsel Banking & Corporate Son Nguyen Esq. Director Banking & Corporate Copyright 2009 Tuan Phung/VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

32 Copyright 2009 Tuan Phung/VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

40 DISPUTE RESOLUTION Local Insights Meet International Expertise Clients & experience* Copyright 2009 Tuan Phung/VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

41 Tuan A. PHUNG Esq. Managing Partner Website: Cell: (84) Tel.: (84) Fax: (84) Ho Chi Minh City: Suite 501, Sailing Tower 111A Pasteur Street District 1, Ho Chi Minh City Vietnam Hanoi Suite 501, North Asia Tower 9 Dao Duy Anh St. Dong Da District, Hanoi, Vietnam Copyright 2009 Tuan Phung/VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

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