Are you planning to start a Franchisee Business in Thailand? It is a good idea indeed for both Thai and Foreign Investors. With the growth of the eCommerce industry in Thailand, your franchisee business will surely be able to address online orders and yield profit. Additionally, International Procurement Offices in Thailand are now Board of Investment eligible activities. So, international franchising won’t be an issue related to this.
To help you plan your business more effectively, let us help you with some facts about Franchisee Business in Thailand.
- What are the Specific Laws for Franchisees in Thailand?
- How do Law Firms help Franchisee Businesses in Thailand?
- Get the Pitfalls Covered
What are the Specific Laws for Franchisees in Thailand?
The establishment and operation of a franchise, or more particularly, the operating system, are governed by distinct laws because Thailand lacks its own comprehensive franchising legislation. Depending on the sort of business, a typical franchise in Thailand could need to review more than 10 different Acts and rules. The Civil and Commercial Code, numerous Trademark Acts, the Trade Secrets Act B.E. 2545, and the Unfair Contract Terms Act B.E. 2540 are among the most significant.
Because of this, franchising in Thailand may seem to be a very difficult structure to pursue. Additionally, violations and breaches of Intellectual property rights are other concerns. Generally speaking, contract freedom is king in Thailand. However, to ensure the protection of both the franchisor and franchisees, a foolproof contract is very crucial. Therefore, a skilled franchise attorney must comprehend the various concerns that each party must take into account in order to strike a fair balance. Here is where you need a reliable law firm in Thailand!
How do Law Firms help Franchisee Businesses in Thailand?
If you are going to start a franchise business in Thailand, you will need a seasoned law firm or professional to undertake those activities that you may not be apt or comfortable with. These activities can be related to tax regulations, statutory compliances, or legal grounds. Continue reading to know them all.
Drafting or Reviewing Master Franchise Agreements
Thai law is relatively liberal since it is a civil law country, allowing the courts to evaluate the regulation’s meaning rather than its specific terms of operation. Due to this, other general rules governing contracts and commercial operations govern franchisee relationships in the absence of an express law of franchise.
Therefore, to review or draft a franchise agreement in Thailand, you will typically need to be conversant with the following legal sources:
- Civil and Commercial Code
- Thailand Trade Mark Act B.E. 2534 (1991), as amended by the Trade Mark Act (Number 2) B.E. 2543 (2000)
- Thailand Patent Act B.E. 2522 (1979), as amended by the Patent Act (Number 2) B.E. 2535 (1992) and Patent Act (Number 3) B.E. 2542 (1999)
- Thailand Copyright Act B.E. 2537 (1994)
- Trade Secrets Act B.E. 2545 (2002)
- Unfair Contract Terms Act B.E. 2540 (1997)
- Trade Competition Act B.E. 2542 (1999)
- Act Relating to Price of Merchandise and Service B.E. 2542 (1999)
- Revenue Code B.E. 2481 (1938)
- Direct Sales and Direct Marketing Act B.E. 2545 (2002)
- Product Liability Act B.E. 2551 (2008)
When creating and reviewing franchise agreements and franchise development agreements, it is also important to take into account the different Ministerial Regulations that implement and further develop these Acts.
Due Diligence for Franchisors/ Franchisees
Due diligence on a possible franchisee is crucial, not only to ensure that they are reliable and will properly establish a business in Thailand but also to ensure that they have the necessary skills and experience to operate the company as the franchisor would instruct. Additionally, some essential due diligence measures include:
- To verify directors, shareholding, and company debt, the Ministry of Commerce conducts searches on the corporate organization.
- Court searches in the relevant areas to find litigation or other disputes that note the parties involved, the nature of the conflict, the court’s jurisdiction, the cause or causes of action, and the stage at which any actual, threatened, or pending litigation, administrative action, or settlements are in.
- The list of all necessary regulatory approvals for food, drink, pharmaceuticals, nutrition, medical devices, and cosmetics, together with documents of these approvals.
- Knowledge of takeover procedures and any necessary transitional plans.
Get the Pitfalls Covered
So, to reassure you that you need a law firm to set up your franchisee business in Thailand, let us cover the common pitfalls that can trap you anytime during the course of the business.
There are prohibitions in some clauses in franchise agreements by Thai law, notwithstanding the propensity of some franchise agreement drafters to overdo it in an effort to offer the franchisor significant protection.
For instance, it is against the law for an agreement to be struck in advance that absolves a debtor of his own deception or egregious carelessness. Additionally, other terms that can violate the Thai Unfair Contract Terms Act include:
- a clause that limits or excludes liability for contract breach.
- any clause that permits contract termination without cause or without the opposing party has committed a substantial breach.
- a clause that permits one party to postpone or refuse to carry out its duties under a contract without providing justification.
- a clause that permits one party to impose additional duties on the other party beyond those reached at the time the contract was executed.
Don’t you think that these pitfalls can turn grave for your franchisee business in Thailand? Therefore, instead of running the horses of your brain, consult with Konrad Legal today. Email us at [email protected] to meet all your legal requirements for your Franchisee Business in Thailand.
