Changes in the franchise business system have the potential to affect the franchisee’s business operations if they are not updated promptly.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Decree No. 35/2006/ND-CP.

We have received the following question:

TLT Legal let me ask, currently I am running a franchise coffee shop of the brand… But last year the franchising company changed the logo and changed the menu ingredients without my knowledge. So some customers come in with questions and think my store has changed owners. I’m afraid customers won’t trust my store. I have rechecked the franchise contract with the company, there is not any regulation about the obligation of the company if it changes the franchise brand identity.

When agreeing on a franchise, the franchisor and the franchisee must enter into a commercial rights co-development contract (also known as a franchise contract).

During the implementation of the franchise contract, each party is obliged to comply with the signed agreements and the franchise model to ensure the quality standards of the franchised products and services are maintained, as well as such as protecting the right to use each party’s intellectual property. Any change in brand identity can affect the business performance of the franchise model, and if the franchisee is not promptly updated about the change, it may suffer losses.

Therefore, based on Clause 2, Article 8 of Decree No. 35/2006/ND-CP, when the franchisor makes changes in the franchise model, they have the following obligations:

Article 8. Responsibility to provide information of the franchisor

2. The franchisor is responsible for immediately informing all franchisees of any important changes in the franchise system that affect the franchisees’s business operations under the franchise method.

According to the above regulations: if the franchise contract does not have provisions, or has provisions but is unclear about the case of changes in the franchise business system, then:

• The default franchisor is obliged to immediately notify the franchisee of these changes;
• If the franchisor does not notify immediately, resulting in damage to the franchisee, the franchisee can sue for breach of the franchise contract and request compensation.