Franchising a business in Cambodia
Looking around the capital city of Cambodia, we could see many global brands and international franchises pop up alongside the road. These include Carl’s Jr, Cold Stone, Creamy, Domino’s Pizza, Burger King, Krispy Kreme, Levi’s. Pandora, Starbucks, and others. These franchises seem to be going smoothly and getting notice from customers even more from year to year.
Cambodia is a rapid economic growth with a rate of 7.7% between 1995 and 2018, according to World Bank Overview. Therefore, it is simply easy to understand the needs of people to satisfy their needs. If international brands or franchises entered Cambodia, people will be more conveniences to buy which products or foods they want rather than waiting until going abroad to buy them.
The investors and businessmen are supposed to consider franchises business in Cambodia. But before starting, this article will explain to you even clearer about franchises entity in Cambodia.
Regulation: Franchise law in Cambodia has not been enacted comprehensively, therefore, franchising business is mainly governed by laws of general application that implicate franchises process. There is no clear duration for the enactment of the law of franchise.
In Cambodia, franchises business primarily governed by the Civil Code, the Law Concerning Marks, Trade Names and Acts of Unfair Competition (Trademark Law), the Notification on the Recordal of License Contracts, dated March 12, 2015 (Franchise Contract Notification).
*For franchise agreements prepared in a foreign jurisdiction, they should carefully localize the provisions to ensure they are enforceable in Cambodia, including dispute resolution clauses, intellectual property provisions, guarantee provisions, non-compete obligations, real estate provisions, and tax-related clauses.
Disclosure and Misrepresentation: Cambodian law does not require pre-contract disclosure, so a franchise agreement must accurate and correct. However, under the Civil Code, if a party enters a contract based on another party’s misrepresentation, that party is entitled to rescind the contract and seek damages from the party that made the misrepresentation. Plus, if the guarantor was not fully informed of all material information about the guaranteed obligation at the time the guarantee was signed, the personal guarantee will be invalid.
Competition Law: Even though there is not competition law in Cambodia, foreign companies commonly insert non-competition provisions in their franchises business agreements to limit franchises from any activities that compete with them.
Choice of law and dispute resolution: Cambodian laws do not restrict the applying of foreign country’s law, but the local courts in Cambodia may be unwilling to apply foreign law to dispute before them at all. Franchisors should aware that particular issues, like advertisement, approval requirements, real estate, and others, can possibly be governed by only Cambodian law.
All of these are things that investors need to clearly understand before starting the process set up franchises in Cambodia. The procedure is not complicated to follow and notice. However, all factors need to carefully follow on the right path to avoid any further issues happening.