The core answer
Owners of shops and companies thinking about a second branch usually start with the location and the fit-out budget. The question to ask first is whether the first branch runs because of its systems, or because the owner stands there every day. If it is the latter, a second branch will not double revenue. It will split the owner's time in two, and the hidden problems will surface together.
The rule (Thai law). A branch is not a new juristic person. All obligations, debts and liability remain with the same company or the same owner. Opening a branch involves registration and tax steps (branch registration, notifying an additional place of business for VAT, local licences). A lease of immovable property for more than three years must be in writing and registered under section 538 of the Civil and Commercial Code. An employer with ten or more employees in total must have work rules in Thai under section 108 of the Labour Protection Act B.E. 2541.
Our practical view. Open the second branch when you pass three gates, in order. The first gate is that the first branch runs without the owner. The second is that branch-level numbers show clearly that the first branch is really profitable after deducting the salary of the manager you must hire to replace the owner. The third is that the legal documents are ready: the lease, registration, signing authority and employee documents. If any gate is not passed, waiting a few more months is usually cheaper than opening and then having to close.
This guide covers readiness before opening. For controlling contracts and employee documents once you have several branches, see how to control contracts and employee documents across multiple branches. If you are not yet sure whether to expand with your own branches or another way, see expanding through your own branches, franchising or dealers.
1. How much does the first branch depend on the owner?
Answer the following as things really are, not as you would like them to be.
- If the owner stays away from the shop or office for a week running, do sales, quality and atmosphere change?
- Who orders stock, who takes the money, who closes the shift, who deals with an angry customer? If the answer to every one is "the owner", there is no system yet.
- Do regular customers come for the product and service, or because they know the owner personally?
- Is your best employee the only person who can do certain things? If he or she resigns or moves to the new branch, what happens to the first branch?
- Is there anyone outside the family who can genuinely be trusted with cash and keys?
A practical test is to trial the owner's absence first, with the period and the indicators set in advance. If the first branch passes the trial, then invest in the second. The trial also shows which manager is ready to run a new branch.
2. Write the work procedures so others can repeat them
A standard operating procedure (SOP) does not need to be a thick manual. For an SME with two branches, one page per task is enough if it covers the following.
| Task | What the SOP must answer |
|---|---|
| Opening and closing the branch | Who holds the keys, who counts the cash, who checks stock, who receives the end-of-shift paperwork |
| Ordering and receiving goods | Who may order, how receipt is checked, who signs for it, what to do with damaged goods |
| Taking payment and issuing tax documents | Whose account receives receipts, tax invoices and cash, and within how many days |
| Customer complaints, returns, warranty | How far the branch manager may decide alone, and which matters must be escalated |
| New employees | Who trains, who assesses the probation period, which documents must be signed before starting |
| Customer data | What is collected, where it is kept, who can access it |
Keep as evidence the SOP document actually in use and a record of which employee was trained and when. If a dispute with a customer or an employee arises later, this evidence helps show that the company had a system and did not leave each branch to follow its own habits.
3. Branch-level numbers: is the first branch really profitable?
This is a matter of accounting and finance, so consult your bookkeeper or financial adviser. This guide only lists the questions an owner should ask.
- Can you separate the first branch's revenue and costs from central expenses the owner pays through the company?
- Does labour cost include pay for a manager, work the owner used to do without counting it as a cost?
- Is the first branch's profit enough to carry the new branch's rent, salaries and investment while it has no full revenue yet, without drawing on the first branch's working capital?
- If the second branch sells less than expected, how long can you hold on before deciding to close, and what does closing cost (severance, rent still owed under the lease, removal of the fit-out)?
- The profit you see is accounting profit, but is there enough cash? Having profit and not enough cash is common. See profitable but short of cash.
Do not forget the hidden costs, such as the owner's time, the opportunity cost of good employees who move, and the cost of learning from mistakes at a new branch.
4. Registering the branch and notifying the additional place of business
Opening a new place of business for a juristic person usually involves several agencies. Details and forms may change, so check with the agency or your bookkeeper before every filing.
- Juristic person registry. A branch of a company or registered partnership usually has to be registered with the Department of Business Development (check with the local registry office which documents it requires). The company certificate and objects must also cover the business to be carried on at the branch. If they do not, see the amendment of objects in after registration: changing directors, capital, address or objects of a Thai company.
- Value added tax. If the company is VAT-registered, the new place of business must be notified to the Revenue Department (generally by the amendment request form, such as form Por Por 09 (ภ.พ.09)), and the branch will have a branch sequence number or branch number that must appear on tax invoices as the Revenue Department prescribes. Have your bookkeeper set up the invoicing system correctly before the first day of sales.
- Withholding tax and contributions. If the branch pays salaries or service fees itself, agree with your bookkeeper whether to file at the head office or by branch, and how employees stationed at the branch are to be registered for social security.
- Local and specific licences. Signage, sanitation, restaurants, building safety, or any business that needs a specific licence: these apply by actual location. The first branch's licences do not cover the new branch. See business licences.
- Address and shop sign. The name and location shown to the public and on tax documents should match what is registered. For the company's address, see the registered address of a company.
If the business is run by an individual who has not yet registered a company, the second branch is a point at which to consider registering one, because the owner's liability is still unlimited and many contracts will all be in the same name.
For the differences between a branch, a representative office and a subsidiary (if you are interested in setting up a separate juristic person), see representative office, branch or subsidiary. It is a choice that affects liability, tax and management.
5. The lease for the new branch's premises
A well-run branch usually needs investment in fit-out and equipment, so read the lease more carefully than an ordinary purchase contract.
The rule (section 538). A lease of immovable property needs written evidence signed by the party to be held liable before it can be enforced in court. If the lease runs for more than three years, or for the lifetime of the lessee or lessor, it must be in writing and registered with the competent official, otherwise it can be enforced for only three years. In addition, as the text shows, a lease of immovable property is also subject to a statutory maximum term. Check the current text of the law when negotiating a long-term lease.
Points to check when leasing
- Term and renewal. A tenant who invests heavily in fit-out should get a renewal right, or at least a right to negotiate first.
- Does the lessor really have the right to lease? Check the title deed and the landowner's permission. If the lessor is a sub-lessor, check that the head lease allows sub-letting.
- Rent adjustments. Agree a clear mechanism and avoid terms that let the lessor set the rent unilaterally.
- Early termination. If the branch does not work out, can the tenant leave? How much notice? What must be paid on leaving?
- Deposit. The conditions for its return and what the lessor may deduct.
- Fit-out and removal. Who owns the improvements, and must they be removed when the lease ends?
- Permitted use. Does the permitted use match the business and the licences to be applied for (for example, premises where food business or signage is prohibited)?
- Effect if the lessor sells the property. A registered lease term gives the tenant better protection.
For an overview of tenants' and landlords' rights and the disputes that are often misunderstood, see renting a house, a room or a shop: tenant and landlord rights often misunderstood. Before signing, have someone who understands the law read the lease, especially when it is long-term and involves a large investment. See contracts and documents.
6. Employees and work rules
With a second branch, the company's total headcount rises at once, and legal obligations can change with the number.
The rule (section 108). An employer with ten or more employees in total must have work rules in Thai. They must contain at least the items the law requires, such as working days, normal working hours, rest periods, holidays and rules for overtime, and must be announced within the period the law sets from the date the headcount is reached. The text of this section was amended in B.E. 2560 (2017), so check the latest version with the Ministry of Labour before preparing them.
Points to think about when expanding
- Count employees across the whole company. Practitioners generally count the employees of the same employer across all workplaces. Once two branches together reach ten, start preparing the work rules.
- Post the rules at every branch. The work rules must be made available for employees to see at the workplace.
- Use the same employee documents. Employment contracts, application forms, acknowledgements of the work rules and disciplinary records should be central forms.
- Pay and hours may differ between branches only as far as the law allows. Do not let each branch manager set holidays and overtime pay.
- Moving employees to the new branch. A change of workplace that significantly affects the employee's rights (for example, to another province) requires consent or clear wording in the employment contract, and the effect of that agreement should be checked against any rights the employee may have under the law.
Other obligations that change with headcount, such as the welfare committee, safety officer and the quota for employing persons with disabilities, are covered in what you need at each headcount. The work rules themselves are covered in work rules, or we can prepare the documents through HR documents and labour and compliance.
7. The branch manager's signing authority
When the owner is absent, the manager has to make decisions and sign documents. Set authority in writing before the branch opens.
- Contracts the branch manager may sign. For example, routine purchase orders, goods received notes and delivery notes, within the limits the company sets. You can describe them as levels (normal, high, very high) without stating figures, as long as the internal document defines them clearly.
- Contracts that must be signed by a director with signing authority under the company certificate. For example, leases, long-term employment contracts, loans and guarantees.
- Power of attorney. State the grantor, the attorney, the scope and the duration, and keep a copy.
- Holders of the branch bank account and cash. Keep these separate from authority to sign contracts, and set a limit on what the manager may withdraw.
- Do not let the manager act as if with full authority without documents. If the company routinely lets the manager sign major contracts, counterparties may in good faith believe the manager has authority, and the company may then be bound. For a contract review system, see contract review and approval without a legal department.
8. Contracts with partners and customers: one set for every branch
- Use central forms for purchase contracts, quotations, warranty terms and return terms, rather than letting each branch write its own.
- Agree with suppliers that the agreed prices and terms apply to every branch, and who receives the goods and is responsible for payment.
- Name the same juristic person as the contracting party, not the branch name or the manager's name.
- Keep contracts and important documents of every branch centrally, or keep copies in one system.
- Personal data of customers and employees must be handled to the same standard. If the new branch collects more data, see PDPA compliance.
9. Intellectual property and brand
When you open in a new province, the shop name or brand meets new customers and new competitors. Before investing in signage, check that the trademark you use is registered in the company's name, and that the domain name, social media accounts and the branch's Google Maps listing are in the company's name, not in the name of any one employee. See trademark registration.
10. If you intend someone else to open the branch
If the second branch is to be run by a partner or another investor, it is no longer an ordinary branch. It may become a joint venture, a franchise or a dealer appointment, each with different contracts and risks. See expanding through your own branches, franchising or dealers and joint ventures.
11. Checklist before opening the second branch
- The owner's absence from the first branch was trialled for the set period, and the result is acceptable
- There are SOPs for the main tasks that others can follow, and records of employee training
- There are branch-level numbers that separate real costs, including the manager's pay
- The bookkeeper knows the plan and has checked branch registration and the branch number for VAT
- The company's objects cover the branch's business
- Local and specific licences for the new premises are fully obtained before sales begin
- The lease has been read and covers term, early termination, removal and registration (when longer than three years)
- Employees have been counted across the whole company and compared with the headcount obligations, and work rules are in place once the threshold is reached
- The branch manager's signing authority and withdrawal limit are set in writing
- The same contract forms and employee documents are used at every branch
- The branch's trademark, domain and online accounts are in the company's name
- There is a fallback plan if the new branch does not perform as expected, including the cost of closing
Further reading
- How to control contracts and employee documents across multiple branches — how to control documents once you have several branches
- Expanding through your own branches, franchising or dealers — comparing the ways to expand and their legal risks
- Work rules: which companies must have them — details once you reach the headcount threshold
- What you need at each headcount — obligations by number of employees
- Representative office, branch or subsidiary — choosing the form that suits the purpose
- The registered address of a company — the address on documents must match reality
Open the second branch when the first runs without the owner, the branch-level numbers are clear and the legal documents are complete, not when the location is good or there is money to spare.
We help review leases, register branches, prepare work rules and employee documents, and set signing authority for businesses that are expanding to new branches. For an initial consultation, call +66 92 254 2045 or send us the details. See also company registration and HR documents.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.
