There are no specific franchise laws in Thailand apart from some OTCC rules that came into place in Feb 2020. However, each franchise has its own system, rules, and legal requirements. And because each franchise differs from the next, it’s essential that you find tried, tested, and trusted franchise lawyers in Thailand to fight your corner. At Bangkok Legal, we have the experience and expertise to ensure that your franchise deal goes through without any hiccups. And that you understand exactly what you are signing in terms of franchise contracts.
Thai Civil and Commercial Code
The Thai Civil and Commercial Code governs the obligations of the parties involved in the deal to define what is valid in the franchise contract. In a legal sense, there are so many issues to take into consideration. You need to fully understand your legal and tax situation when purchasing a franchise deal. If the franchisor is a non-resident of Thailand, the franchisee will need to withhold 15% royalties to be paid to the former. The rule is different for Thai franchisors, who are liable for 30% of its corporate net income. In this case, the franchisee is to withhold 3% that needs to be paid to the Revenue Department in Thailand. It’s also important to remember that the franchisee is also expected to pay 7% VAT.
Thai Franchise Contracts
The contractual frameworks of each franchise and their agreements and standards differ from company to company. And this is why you need Bangkok Legal to ensure you are protected. It can be hard work to meticulously sieve through the small print of individual franchise contracts, and with so much legal jargon, you need experts who will give you the best impartial advice from franchise lawyers in Thailand.
Thailand Trademark Laws
The Trademark Act is there to protect the franchise. This law will govern if you are correctly using the brand name and products that mirror their philosophy. This law is there to ensure that you follow the processes and rules of the franchise. The franchisor will sub-license its trademarks, logos, and company identity with the franchisee that will be kept under the Thailand Trade Secrets Act of 2002.
Thai Franchise Framework
The Thailand Ministry of Commerce has a very welcoming and positive stance on franchises. The Department of Business Development actively encourages franchises as a business strategy that give Thai brands businesses empowerment. And it even encourages Thai brands to build their franchise abroad. Franchise business is generally unregulated in Thailand. No license is needed to start or obtain a franchise. There are also no franchise whitepaper issues to worry about in the setting up of a franchise or to sign a franchise contract.
Starting a Franchise Business in Thailand
If you are thinking of starting a franchise business or signing a franchise deal with a brand in Thailand, it might be easier than you think. Because of the lack of regulations on franchises, it’s very similar to the process of setting up any normal company in Thailand. Although we recommend that you have access to the best franchise lawyers in Thailand to ensure everything runs smoothly. Whether you are the company buying the franchise license or the company selling a franchise, the process of setting up a company is similar.
From 4 February 2020, the Office of Trade Competition Commission (OTCC) guidelines for franchise businesses in Thailand were created. They are filed under Section 7 of the Unfair Competition Act of Thailand. Here are the seven OTCC guidelines that you now have to take into consideration when starting a franchise business or obtaining a franchise contract:
- 1. Restrictions of franchisee’s rights need a business reason.
- 2. Limitations of subsequent contract adjustment rights by the franchisor.
- 3. The prohibition to purchase products or services from manufacturers or other service providers need a valid reason.
- 4. Selling discounted perishable goods can’t be prohibited without a valid reason.
- 5. Equal conditions have to be offered to the franchisees (anti-discrimination rule).
- 6. Contractual conditions have to pass quality and standard tests.
- 7. Several disclosure requirements as a precondition for entering into a franchise contract by a franchise disclosure document.
The above rules are the official wording directly from OTCC. If any of these rules are circumvented or violated, you will be fined up to 10% of your yearly revenue from the year of the violations.
How Can Bangkok Legal Franchise Lawyers in Thailand Help You?
So, now you understand more about franchise laws in the Kingdom, how can franchise lawyers in Thailand help you? At Bangkok Legal, we take the needs and requirements of our clients with the utmost severity. Here are some services we offer in terms of Thai franchise law.
Complying and Adopting Thai Laws – Merging both Thai and US franchise laws can be a potential minefield. With Thailand’s civil law system, tax rules, and regulatory framework, it’s important to have lawyers who understand the nature of both and can help you adapt and maneuver your way through the legal quagmire. It’s also important to get reliable advice on the new OTCC guidelines.
Corporate Structures & Acquisition – You might need legal help to implement current Thai corporate structures and processes for the international franchisor in Thailand. You will also need help to set up a Thai Co. Ltd company. Legal support is also imperative when dealing with investors in the acquisition of franchises in the Kingdom.
Managing Intellectual Property Rights – If you are setting up a franchise in Thailand, you will need to draft and structure trademark agreements and other Intellectual Property rights to protect your brand or franchise. This is a very important aspect of setting up a franchise in Thailand.
Ongoing Support & Franchise Litigation – If you are starting a new franchise or signing a franchise agreement with a brand in Thailand, you will need continual legal support. In terms of franchise litigation, you will also need ongoing support, advice, and representation. And this is essential even if you are the franchisor or the franchisee. Ongoing legal support is of paramount importance.
Obtaining the services of reliable and trusted franchise lawyers in Thailand is the only viable route to take. Expert legal advice is essential when starting a new franchise business or signing a franchise contract with a brand in Thailand or any other country. At Bangkok Legal, we have unparalleled expertise in regards to franchise laws and regulations in Thailand. We work tirelessly to ensure our clients get the best impartial advice with their best interests in mind.