QuestionsQuestions (EXECUTIVE ORDER NO. 169)
EO 169 aims to strengthen the franchising industry by creating a transparent, business-friendly environment and promoting fair and equitable practices, especially to protect micro, small and medium enterprises (MSMEs) engaged in franchising.
A franchise is a contract/arrangement between a franchisor and franchisee granting the right to operate under the franchise system for a term set by the franchisor, including the right to use a mark, trade secret, confidential information or IP owned by or related to the franchisor, with the franchisor controlling administration of the franchise operations during the franchise, in exchange for a fee or other consideration.
It must be a written contract between a franchisor and franchisee granting the right to engage in offering/selling/distributing goods or services under a marketing system and technology transfer arrangements, for a certain consideration; the right usually includes use of a trademark/service mark/trade name/business name, know-how, logo-type advertising, or other commercial symbols linked to a business.
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.
EO 169 uses the RA 6977 (as amended) definition based on total assets (inclusive of those arising from loans but excluding the land where the business office/plant/equipment is situated): micro (< P50,000), cottage (P50,001–P500,000), small (P500,001–P5,000,000), and medium (P5,000,001–P20,000,000).
They must be in writing, duly notarized, and must include the minimum terms and conditions enumerated in Section 2 (e.g., products/services description, rights granted, fee disclosures, responsibilities of both parties, non-discrimination, duration/renewal, pre-termination/termination effects, cooling-off, dispute resolution, and remedies).
The agreement must include full disclosure of any pre-signing, initial, or recurring fees such as franchise fee, promotion fee, royalty fee, or related types of fees that may be imposed on the MSME franchisee.
The franchise agreement must provide for a "cooling off" period that gives the MSME the option to terminate the agreement.
It must include a dispute resolution mechanism with a stipulation that parties may seek voluntary mediation under RA No. 9285 (Alternative Dispute Resolution Act of 2004).
The franchise agreement must state the duration of the franchise and the terms and conditions for renewal.
It must include the effects of, and grounds for, pre-termination, termination, or expiration of the franchise agreement.
The agreement must contain a non-discrimination provision ensuring that the MSME franchisee is not subjected to discriminatory practices within the franchise relationship.
Franchisors must register franchise agreements with the DTI. If they are members of duly registered associations, they register their Standard Franchise Agreement with an undertaking that future agreements with MSMEs will incorporate the Section 2 minimum terms. Otherwise, they must register all franchise agreements with MSMEs within 30 days from execution.
The DTI must create an MSME Registry of Franchise Agreements. Only franchise agreements incorporating the minimum terms and conditions under Section 2 may be registered therein.
Franchisors must comply with the requirements in Sections 2 and 3 upon renewal of the existing franchise agreement with MSME franchisees.
Compliance with the inclusion of the minimum terms and conditions may entitle franchisors to incentives or benefits provided by the National Government. DTI is directed to formulate and enact measures for entitlement to incentives of qualified franchisors, subject to existing laws and policies.
DTI must issue implementing guidelines within 90 days from effectivity. EO 169 takes effect immediately after publication in the Official Gazette or a newspaper of general circulation.