As more Korean companies in the distribution, F&B, and cosmetics sectors expand into Vietnam, there is also growing interest in operating directly owned stores or entering the market through a franchise model.
Vietnam’s distribution sector was opened subject to certain conditions when the country joined the World Trade Organization (WTO).
As a result, completing company incorporation alone does not automatically allow a foreign-invested company to begin retail operations. Depending on the business model, a separate Business License and Retail Outlet Establishment License may also be required.
Franchise entry likewise involves more than signing a franchise agreement.
Registration or reporting with the competent Vietnamese authority may also be required.
This article reviews the licensing framework for Vietnam’s distribution sector, franchise registration requirements, and key issues to consider when planning store expansion.
Applicable Laws and Licensing Framework
1. Distinguishing Company Incorporation from Business Licensing
An Investment Registration Certificate (IRC) and an Enterprise Registration Certificate (ERC) establish the legal existence and registered business scope of a foreign-invested enterprise (FIE).
However, these certificates do not by themselves authorize all actual retail activities.
Under Vietnam’s Commercial Law and Decree No. 09/2018/ND-CP, a foreign-invested enterprise may need to obtain a Business License to engage in activities such as:
- wholesale and retail distribution;
- leasing of goods, excluding financial leasing;
- commercial intermediary activities; and
- certain e-commerce or logistics activities not already liberalized under international commitments.
By contrast, a business that only imports goods and sells them to other businesses on a pure B2B basis may, in some cases, be able to operate without a separate Business License if the relevant business lines are properly registered in its IRC and ERC.
Accordingly, whether sales are made directly to consumers on a B2C basis is often a key factor in determining whether additional licensing is required.
| Category | Business License (BL) | Retail Outlet Establishment License (ROEL) |
| Issuing Authority | Provincial Department of Industry and Trade (DOIT) where the head office is located | DOIT where the retail outlet is located |
| Legal Basis | Articles 8–13 of Decree No. 09/2018/ND-CP | Articles 22 and 27–29 of the same Decree |
| Validity | Generally indefinite, subject to limited exceptions for certain activities | Generally limited by the remaining term of the IRC or lease, whichever is shorter |
| Second Store and Beyond | Not applicable | Economic Needs Test (ENT) may apply |
A Business License may be issued under different conditions depending on whether the investor is covered by relevant WTO or other international commitments.
Certain product categories, such as rice, sugar, audio-visual products, books, newspapers, and magazines, may also require additional review or opinions from competent authorities.
For the first retail outlet, the process is generally simpler.
From the second outlet onward, an Economic Needs Test (ENT) may apply.
However, a retail outlet of less than 500㎡, located within a commercial center and not operating in a convenience-store or mini-mart format, may qualify for an ENT exemption.
Investors from countries covered by agreements such as the CPTPP or the EU–Vietnam Free Trade Agreement (EVFTA) may also benefit from more favorable treatment in certain circumstances.
Franchise Regulations
Franchising in Vietnam is governed by the Vietnamese Commercial Law and related implementing regulations, including Decree No. 35/2006/ND-CP, as amended, and the relevant Ministry of Industry and Trade circulars.
Where a foreign franchisor introduces a franchise system into Vietnam, registration with the Ministry of Industry and Trade (MOIT) is generally required.
By contrast, domestic franchising between Vietnamese entities was simplified through legislative amendments and is generally subject to reporting rather than the same registration regime.
Accordingly:
- an initial franchise entry from a Korean parent company into Vietnam may be subject to registration; while
- later sub-franchising by a Vietnamese master franchisee may fall under a different reporting structure.
Practical Issues and Key Considerations
1. ENT and Store Expansion Strategy
Because the Economic Needs Test (ENT) may apply from the second retail outlet, companies planning multiple stores should review their expansion strategy from the stage of selecting the first location.
Whether an ENT exemption can be used for smaller stores located inside commercial centers may materially affect later expansion timing and costs.
The Ministry of Industry and Trade has also been considering amendments to replace or revise Decree No. 09/2018/ND-CP.
Accordingly, companies should confirm the rules in force at the actual time of entry.
2. Franchisee and Master Franchisee Requirements
A business system to be franchised generally needs to have been actually operated for at least one year.
Where a Vietnamese business receives primary franchise rights from a foreign franchisor and then intends to sub-franchise the system, it should also confirm whether the one-year operating requirement applies before further sub-franchising.
This can materially affect the schedule where a company plans multi-store expansion from the outset.
The franchisor is also generally required to provide the prospective franchisee with a franchise disclosure document containing information on the business system, financial information, and other key matters before execution of the agreement.
As a practical matter, the launch schedule should therefore be based on the completion of the required registration or reporting process, rather than merely the franchise agreement signing date.
Starting a foreign franchise before completing the applicable registration process may lead to administrative sanctions or requests to correct the business structure.
3. Additional Product-Specific Licenses
Obtaining a Business License and Retail Outlet Establishment License does not necessarily complete every licensing requirement.
For example, food sold in a retail store may still need to satisfy applicable food-safety procedures with the competent authority, depending on the product category.
Imported cosmetics generally require completion of the relevant cosmetic product notification procedure before customs clearance and commercial sale.
Other categories such as:
- rice;
- books and newspapers;
- audio-visual products; and
- certain other regulated goods
may require additional consultation or approval from the competent ministry or authority.
The detailed licensing requirements therefore depend on both:
- the product category; and
- the business model, such as direct import, manufacturing, distribution, or franchising.
Key Issues and Strategic Considerations
1. Who Bears the Licensing Burden Depends on the Entry Structure
Where the Korean parent company directly establishes an FIE and operates stores, the Korean-invested entity generally bears the primary licensing burden.
Where the company instead appoints a local distributor or franchise partner, the local partner may be responsible for obtaining the relevant Business License and retail outlet approvals.
However, this structure may reduce the Korean brand owner’s direct control over local operations.
The licensing allocation should therefore be considered together with the desired level of brand and operational control.
2. Contract Structure Requires Separate Review
Royalty and Technology Transfer Payments
Where franchise royalties or trademark usage fees are remitted from Vietnam to Korea, Vietnamese withholding tax or Foreign Contractor Tax issues may arise.
The Korean recipient may also have related tax reporting obligations.
Intellectual Property Licensing
The franchise agreement should clearly separate and regulate:
- trademark use rights;
- business name use;
- other intellectual property licenses; and
- termination-related obligations to cease use.
This helps reduce disputes over continued trademark or know-how use after termination.
Store Expansion Planning
Because an ENT may apply from the second retail outlet, the store rollout strategy should be reflected from the beginning when selecting the first store location.
DECENT Law Firm Global Business Practice Team
Market entry into Vietnam involves more than local licensing.
The contractual relationship between the Korean parent company and the Vietnamese entity or local partner should be reviewed together with the applicable licensing structure.
DECENT Law Firm’s Global Business Practice Team advises on practical market-entry issues including:
- Vietnam company establishment;
- Business License applications;
- Retail Outlet Establishment License procedures;
- franchise registration and structuring;
- franchise agreement review;
- intellectual property licensing; and
- royalty-related tax issues.
If your company is considering entering Vietnam’s distribution sector or expanding through a franchise model, it is advisable to review the product category, licensing structure, store expansion plan, and contractual framework together from the outset.