Definitions of Key Terms
- "Franchise" involves a contract granting the franchisee rights to operate a business using the franchisor's system, marks, or trade secrets with franchisor control over operations in exchange for fees.
- "Franchise Agreement" is a written and notarized contract outlining rights to offer goods or services under a franchise system including intellectual property use.
- "Franchisee" and "Franchisor" are registered entities or persons engaged in franchising activities.
- "MSME" classification is based on asset size excluding land value with specific asset thresholds for micro, cottage, small, and medium enterprises.
- "Person" includes natural or juridical entities duly registered.
Mandatory Minimum Terms in Franchise Agreements
- Agreements must be in writing, notarized and include:
• Description of products/services franchised
• Specific rights granted including intellectual property use registered with IPOPHIL
• Full disclosure of all fees (franchise, promotion, royalty etc.)
• Detailed franchisor and franchisee responsibilities
• Non-discrimination clauses
• Franchise duration and conditions for renewal
• Grounds and effects of pre-termination, termination or expiration
• A "cooling off" period allowing MSMEs an option to terminate
• Dispute resolution mechanisms with provision for voluntary mediation under RA 9285
• Remedies for breach of contract terms - Non-MSME franchisees may adopt these terms as best practices.
- Franchisors complying with these provisions may qualify for government incentives as decided by the DTI.
Registration and Franchise Registry
- Franchisors must register franchise agreements with the DTI.
- Members of registered franchise associations register only their Standard Franchise Agreement and undertake to comply with minimum terms for future MSME agreements.
- Non-member franchisors must register all franchise agreements within thirty days of execution.
- The DTI will maintain a Franchise Registry exclusively for agreements meeting the minimum prescribed terms.
Encouragement for Franchise Association Membership
- Franchisors are encouraged to join registered franchise associations to promote industry cooperation and compliance.
- MSMEs are encouraged to transact with franchisors that are members of such associations to ensure adherence to fair standards.
Compliance with Existing Agreements
- Existing franchise agreements with MSMEs must be brought into compliance with the new requirements upon renewal.
Administrative Implementation and Funding
- The DTI is tasked to issue implementing guidelines within ninety days from the Order’s effectivity.
- Funding for implementation will come from DTI’s regular appropriations and future budgets as processed through the General Appropriations Act.
Legal Provisions: Separability and Repeal
- If parts of the Order are declared invalid or unconstitutional, unaffected provisions continue to be enforced.
- Prior inconsistent orders, rules, regulations or issuances are repealed or modified accordingly.
Effectivity
- The Order takes effect immediately upon publication in the Official Gazette or a newspaper of general circulation.