A Complete Guide to Franchise Business in Vietnam: Opportunities, Legal Regulations, and Practical Risks for Foreign Investors

This article explains the latest trends in Vietnam's franchise market, business opportunities in the food and beverage, retail, education, and services sectors, the advantages and risks of the franchise model, and the practical challenges foreign investors face. It also organizes, in an accessible way, the essential legal points to keep in mind when entering the market—registration obligations with the Ministry of Industry and Trade, information disclosure, contract practice, intellectual property protection, and tax and remittance regulations. NEXORA LAW FIRM has extensive experience providing one-stop support to Japanese and other foreign-invested companies in Vietnam, covering franchise entry support, registration procedures with the Ministry of Industry and Trade, preparation of Franchise Disclosure Documents (FDDs), contract review, trademark registration, and the structuring of tax and remittance arrangements. Our practice-oriented legal advice helps clients pursue business expansion and risk management at the same time.

Over the past few decades, numerous well-known Western and Asian brands have entered the Vietnamese market, becoming part of everyday urban life. From restaurant chains to convenience stores, business expansion through the franchise model (nhượng quyền thương mại) is thriving, making Vietnam an extremely promising franchise market for foreign investors—particularly those from Japan and other Asian countries. However, alongside this appeal come legal and practical challenges. This article explains, based on the latest information, the current state of franchise business in Vietnam, the advantages and disadvantages of the franchise model, the specific opportunities and challenges for foreign investors, and the legal points and recommendations foreign investors should bear in mind.

01 - Current State of the Franchise Market in Vietnam

The wave of franchise business reached Vietnam in the late 1990s, pioneered by well-known chains such as Jollibee from the Philippines (1996), Lotteria from South Korea (1997), and KFC from the United States (1997). Since then, the market has expanded rapidly, with particularly notable growth in foreign-invested brands in recent years. As of September 2023, more than 310 foreign brands across all industries are reported to have registered franchise operations. Of these, food and beverage businesses—including fast food, bakeries, cafés, beverages, and restaurants—account for more than half, making up over 50% of all franchise agreements. Looking at the countries of origin of franchisors, the United States, Australia, South Korea, Singapore, and Thailand rank at the top, with Japanese brands also included among them.

At present, foreign-invested franchise outlets are concentrated mainly in major cities such as Hanoi and Ho Chi Minh City, but this momentum is spreading to provincial cities as well. Indeed, "big name" brands such as McDonald's, Starbucks, Burger King, and KFC are expanding their store networks in major cities and subsequently moving into emerging cities such as Da Nang and Hai Phong. In the food and beverage sector, not only Western but also Korean, Thai, and Japanese chains are popular, with a wide variety of formats including Korean barbecue, ramen, sushi, and cafés. For example, Japanese-capital convenience store chains such as FamilyMart and MiniStop, as well as 7-Eleven (originally American, now Japanese-operated), have also entered Vietnam and are increasing their store counts in urban areas. Circle K (United States), a major convenience store operator, opened its first Vietnamese store in 2008 and has since grown rapidly to more than 400 outlets.

In recent years, franchise expansion has also been spreading beyond food and beverage into sectors such as retail (convenience stores, general goods), education (language schools, etc.), entertainment, healthcare, beauty services, children's services, and lifestyle-related businesses. For instance, the boom in Taiwanese-style drink stands (lemon tea, bubble milk tea, etc.) has been remarkable, and Vietnam has become the third-largest bubble tea market in Southeast Asia, reaching a market size of US$362 million in 2021. Tea brands from various countries—DingTea, TocoToco, Tiger Sugar, The Alley, Phuc Long, and Gong Cha—moved quickly to develop the market through franchising and captured significant market share. As a result, Vietnam is now internationally recognized as a "promising franchise market" for foreign brands, and domestic Vietnamese entrepreneurs are also actively pursuing business opportunities through the franchise model.

02 - Opportunities and Attractions of Franchise Expansion

Franchise expansion in the Vietnamese market offers the following concrete advantages.

03 - Risks and Challenges of Franchise Expansion

At the same time, franchise expansion in Vietnam involves the following risks and practical challenges.

04 - Legal Procedures and Regulations Foreign Investors Should Note

For foreign companies expanding through franchising in Vietnam, the following legal requirements and regulations are particularly important.

Business Track Record Requirement

Foreign franchisors are required to have at least one year of operating experience with the goods or services to be offered in Vietnam, either in their home country or elsewhere.

Franchise Registration Obligation

Where a foreign franchisor conducts franchising in Vietnam, prior registration with the Ministry of Industry and Trade (MOIT) is required. (This is not required for franchising between domestic Vietnamese enterprises.)

Key Documents Required for Registration
Registration application
Franchise Disclosure Document ("FDD")
Certificate of business registration (enterprise registration certificate from the home country)
Most recent audited financial statements
Proof of intellectual property rights, such as trademark registration certificates

* All foreign-language documents must be translated into Vietnamese and notarized.

Information Disclosure Obligation

The franchisor must provide the franchisee with the FDD and a draft contract (in Vietnamese) at least 15 business days before the franchise agreement is signed (unless the parties otherwise agree).

Contract Requirements

The contract must be drawn up in Vietnamese (in practice, it is common to prepare a bilingual version alongside English). Key clauses should clearly cover the contract term, royalties, conditions for use of intellectual property, non-compete obligations, and dispute resolution methods.

Protection of Intellectual Property

Trademarks and logos must be registered in Vietnam in advance. To prevent counterfeiting and unauthorized use by franchisees, registration and a properly structured licensing agreement should be put in place.

By agreement between the parties, a franchise agreement may involve the transfer of ownership of intellectual property rights, or alternatively may only grant a license to use such rights. Whichever arrangement is chosen should be clearly set out in the contract.

Tax and Remittance Matters

Because withholding tax applies to royalty remittances, it is advisable to clearly specify the remittance conditions and the currency of denomination in the contract.

* Some Practical Barriers and Countermeasures

Beyond clearing the legal requirements, several practical barriers must be prepared for during actual rollout. The main points are as follows.

Administrative procedures: Registration with the Ministry of Industry and Trade and obtaining various business licenses involve complex documentation and dealings with the authorities. It is important to start early with expert support and proceed with the application without deficiencies.
Language and cultural barriers: Contracting and negotiation in Vietnamese, the official language, are unavoidable, and differences in business customs must also be taken into account. Efforts should be made to prevent misunderstandings and friction through accurate translation and careful communication.
Partner relationships and brand control: Careful selection of local franchisees and building good cooperative relationships after the contract is signed are keys to success. In addition, systems should be established to regularly supervise and support franchisees in complying with brand standards, and to promptly take corrective action when problems arise.

Recommendations and Comments for Foreign Investors

While Vietnam's franchise market holds great potential, success requires careful preparation and cautious handling. Beyond thorough compliance and risk management, it is essential to research local laws before market entry, complete the necessary procedures, and put in place measures to protect intellectual property such as trademark registration. Careful attention should also be paid to offering products and services suited to local needs and to selecting reliable partners.