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Practices

Franchising in Thailand

Economy

Thailand has the world's 33rd largest economy, based on GDP figures. Thailand's service and industry (including financial services, automobiles and electrical appliances) sectors are growing rapidly and account for over eighty five (85) percent of Thailand’s GDP.

Legislation

There is currently no specific law that regulates franchise agreements or the franchising industry in Thailand. There has been a draft Retail and Franchise Bill, which is yet to be finalised and passed as an Act. There are however a number of regulations that impact upon the regulation of franchising in Thailand, for example; the Civil & Commercial Code (CCC); Thai Trademark Act 1991; Trade Secrets Act 2002; the Foreign Business Act; the Trade Competition Act and the Thai Revenue Code. (In accordance with the draft Retail and Franchise Acts, two central commissions will be established to directly control the respective industries; retail and franchising.)

Franchise Market

There are more than 850 franchise and licensing businesses in Thailand, of which approximately a third are internationally owned franchises. Thailand's franchise market was estimated to be worth more than $4.4 billion US dollars in 2009 which was a rise of close to sixty (60) percent on the previous year. Franchising has been an option for many workers as a reaction to job losses in the economic downturn.

Franchise Legislation
  • A foreign-owned company (or a company where the majority ownership belongs to foreigners) can only conduct a franchising business after they have obtained approval from the Thai Ministry of Commerce.
  • Under the draft Retail and Franchise Act, a franchisor will have to overcome various prerequisite conditions before any entitlement to offer a franchise in Thailand will be permitted. For example, the franchisor must have conducted its business for at least two (2) years and must have been earning a profit from a minimum of two (2) existing branches for at least two (2) accounting years. Once this is satisfied a potential franchisor will also have to apply for a licence to operate a franchise business.
  • Registration of a trade mark licence, (which is a necessary component of a franchise) must be registered with the Thai government agency.
  • There are currently no disclosure requirements.
  • The draft Retail and Franchise Act states that the franchisor must reveal all 'necessary' information within sixty (60) days of signing the franchise agreement, 'necessary' is yet to be defined.
Conclusion

Seeking specialist legal expertise to establish a presence in Thailand will be crucial to potential franchisors, to ensure compliance with local laws and enforceability.