Franchise business in Thailand need to take into account the regulation of 30th of October 2019, Trade Competition Commission announced the Notification regarding the Guidelines for the Consideration of Unfair Trade Practices in Franchise Businesses (“Franchise Guidelines”), which provides essential guidelines for franchise operators and prohibits unfair or deceptive trade practice in a franchise business in Thailand.
The regulation mainly focuses on three matters which include the discloser of material information, franchisee’s priority right, and unfair trade practice. H&P lawyers in Bangkok have helped to set up a large number of franchise businesses in Thailand in the last few years.
DISCLOSER OF MATERIAL INFORMATION
To prevent economic losses arising from misrepresentation or omissions of material facts about the proposed franchise, the regulation requires the franchisor to provide a prospective franchisee with material information regarding the franchised business.
In H&P lawyers’ opinion, this rule allows the franchisee to weigh the risks and benefits of purchasing a franchise before entering into a franchise agreement. Below are lists of information in which the franchisor must disclose prior to a franchise sale:
-Estimated Initial Investment such as entry fee, royalties fee, cost of equipment, marketing, training, advertising.
-Business Plan such as assistance to operate the business, training program, marketing plan, and the number of franchise outlets which is located or maybe located nearly to the prospective franchisee’s exclusive territory.
-Intellectual Property Rights such as the terms, conditions, and limitations of the franchisee to use franchisor’s IP rights.
-Specific Conditions of Franchise Agreement including the renewal, amendment, and termination of the franchise agreement.
On 11th of August 2020, the Commission has announced a new amendment of the Franchise Guidelines, to revise article 4 which limits the franchisor’s ability to expand franchise business into the specific territory.
Under the amended regulation, if the franchisor wants to open a franchise outlet in an area near the franchisee’s exclusive territory, regardless of whether the franchisor will operate that outlet by itself, another franchisee, or by any third party. The franchisor must give that franchisee a prior option to open such a new outlet, except the gross sale of the franchisee does not reach the minimum amount which has been previously set. In case the franchisee is entitled to those rights, the franchisor must give the franchisee at least 30 days to notify the franchisee’s acceptance.
If you need to set up a franchise in Thailand, please contact H&P Bangkok lawyers at [email protected]