QuestionsQuestions (EXECUTIVE ORDER NO. 169)
EO No. 169 aims to strengthen the franchising industry by creating a transparent and business-friendly environment and promoting fair and equitable practices, particularly to protect micro, small and medium enterprise (MSME) franchisees.
A franchise is an agreement where the franchisor grants the franchisee the right to operate under the franchise system, use certain intellectual property or confidential information owned by or relating to the franchisor, and control the franchisee’s business operations per the franchise system, in return for a fee or other consideration.
It is a written contract where the franchisor grants the franchisee the right to engage in offering/selling/distributing goods or services under a marketing system (including technology transfer), for consideration, which generally includes use of trademark, service mark, trade name/business name, know-how, logos, or other commercial symbols.
A franchisee may be a sole proprietorship, partnership, cooperative, or corporation duly registered with the DTI, SEC, or CDA, as applicable.
A franchisor may be a sole proprietorship, partnership, cooperative, or corporation duly registered with the DTI, SEC, or CDA.
It follows RA No. 6977 as amended, using total assets inclusive of assets arising from loans but excluding the land where the office/plant/equipment are situated, categorized as micro (<₱50,000), cottage (₱50,001–₱500,000), small (₱500,001–₱5,000,000), and medium (₱5,000,001–₱20,000,000).
Examples include: (1) name and description of products/services; (2) specific rights granted to the MSME franchisee (including use of IP duly registered with IPOPHIL); (3) full disclosure of all pre-signing and recurring fees; (4) detailed responsibilities of franchisor (including types/particulars of assistance and submission to DTI); (5) detailed responsibilities of MSME franchisee; also includes non-discrimination, duration/renewal, effects of pre-termination/termination/expiration, cooling-off period, dispute resolution mechanism (including RA 9285), and remedies.
Franchise agreements must provide full disclosure of any pre-signing, initial, or recurring fees such as franchise fee, promotion fee, royalty fee, or any related fee that may be imposed on the MSME franchisee.
The franchise agreement must include a provision on a “cooling off” period giving the MSME the option to terminate the agreement.
It requires a dispute resolution mechanism that includes a stipulation that parties may seek voluntary mediation under RA 9285 (Alternative Dispute Resolution Act of 2004).
They must be in writing and duly notarized.
Franchisors are responsible for registering franchise agreements with the DTI; franchisors that are members of duly registered franchise associations register their Standard Franchise Agreement and undertake that future MSME franchise agreements include the minimum terms.
Franchisors not members of any duly registered franchise association must register all franchise agreements entered into with MSME franchisees within thirty (30) days from execution.
The DTI creates an MSME Registry of Franchise Agreements. Only franchise agreements that incorporate the minimum terms and conditions under Section 2 may be registered therein.
It mandates them for franchise agreements between franchisors and MSME franchisees within the Philippines; for non-MSME franchisees, franchisors may consider them as best practice.
Franchisors with existing franchise agreements with MSMEs must comply with Sections 2 and 3 upon renewal of their respective franchise agreements with MSME franchisees.
It takes effect immediately after publication in the Official Gazette or in a newspaper of general circulation.