A US's McDonald restaurant in HCM City. As of July 15, there were 137 franchise foreign brand names in Viet Nam with annual turnovers reaching up to a million dollars. — Photo kenh14.vn

HA NOI (Biz Hub) — As the country is anticipating a boom in franchising in the near future, experts say the legal framework governing franchising is in dire need of improvement.

Experts say the current regulations on franchising, which have been in effect for around ten years, have become outdated, especially with the issuance of new laws on investment and enterprise last year.

Tran Thi Thu Phuong from the University of Commerce's Economics Faculty said under the current framework, it was mandatory for foreign firms to register themselves before turning a business into a franchise, but the domestic firms were under no obligation to do so.

As of July 15, there were 137 franchise foreign brand names in Viet Nam with annual turnovers reaching up to a million dollars.

Many domestic firms also operate under a franchise model, or authorisation given by a company to others to use its name and sell its goods, such as Trung Nguyen Coffee, Pho 24, Kinh Do Bakery and The Gioi Di Dong (Mobile World). However, no official statistics were available about the number of domestic firms given such an authorisation contract through a franchise.

In addition, administrative fines for franchise-related disputes were currently too low, ranging between VND1 million ($45.8) and VND5 million ($230), causing difficulties for management, Phuong said.

"Clearer regulations in resolving franchising-related disputes are necessary," Phuong said.

Pham Nguyen Minh, director of Viet Nam Institute for Trade, said the boom in franchising also posed challenges to domestic firms as these remained small scale, lacked capital and management experience.

The wrong choice of partners in franchising could result in a business failure or destroy prestigious franchised brands, he added.

Vo Van Quyen, Director of Domestic Market under the Ministry of Industry and Trade, said many regulations about franchising were no longer appropriate in view of the changed ground realities.

He added that amendments would be put up for consideration to ensure development of trade in the country.

"The improvement in legal framework on franchising must be in line with the law on competition," Quyen stressed. — VNS