Policy and legal framework
- Executive Order No. 169 is issued to strengthen the franchising industry for the protection of MSMEs by pursuing a transparent and business-friendly environment and promoting fair and equitable practices.
- The Order’s foundation includes Section 1, Chapter 1, Title X, Book IV of Executive Order (EO) No. 292 (Administrative Code of 1987), which protects Filipino enterprises against unfair trade practices and supports general welfare through trade policy based on equality and reciprocity.
- Executive Order No. 169 relies on Section 2, Chapter 1, Title X, Book IV of EO No. 292, which mandates the DTI to formulate and implement policies, plans, and programs for development, expansion, promotion, and regulation of trade, industry, and investments.
- The Order anchors on the State policy in Republic Act No. 6977, as amended by Republic Act No. 9501 (Magna Carta for MSMEs), to promote, support, strengthen, and encourage MSME growth and development in all productive sectors.
- Executive Order No. 169 directs the DTI to strengthen franchising so government support can reach MSMEs through transparent rules and fair dealings.
Minimum franchise agreement terms
- Section 2 requires that all franchise agreements entered into by and between a franchisor and an MSME franchisee within the Philippines must be in writing and duly notarized, and must include the listed minimum terms and conditions.
- The minimum terms and conditions in Section 2 include:
- the name and description of the products or services under the franchise (Section 2(a));
- specific rights granted to the MSME franchisee, including the right to use the mark or other intellectual property rights duly registered with the Intellectual Property Office of the Philippines (IPOPHIL) (Section 2(b));
- full disclosure of any pre-signing, initial or recurring fees, including (as examples) franchise fee, promotion fee, royalty fee, or any related fee imposed on the MSME franchise (Section 2(c));
- detailed responsibilities of the franchisor, including enumeration of the types and particulars of assistance and submission of the franchise agreement to the DTI (Section 2(d));
- detailed responsibilities of the MSME franchisee (Section 2(e));
- non-discrimination provisions (Section 2(f));
- the duration of the franchise and the terms and conditions for renewal (Section 2(g));
- the effects of and ground for pre-termination, termination or expiration of the franchise agreement (Section 2(h));
- a “cooling off” period option allowing the MSME to terminate the agreement (Section 2(i));
- a dispute resolution mechanism that includes a stipulation that parties may seek voluntary mediation under Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004) (Section 2(j));
- the remedies of the parties in case of any violation of the franchise agreement’s terms and conditions (Section 2(k)).
- For non-MSME franchisees, Section 2 authorizes franchisors to consider the minimum terms and conditions as best practices and incorporate them into franchise agreements.
- Section 2 provides that compliance with the inclusion of the minimum terms and conditions may entitle qualified franchisors to incentives or benefits from the National Government.
- Section 2 directs the DTI to formulate and enact measures governing the entitlement to incentives of qualified franchisors, subject to existing laws, policies, and regulations.
- Section 2 confines the mandatory minimum terms to franchise agreements with MSME franchisees within the Philippines.
Registration and MSME franchise registry
- Section 3 requires that franchisors register their franchise agreements with the DTI.
- Section 3 provides a membership-based registration framework:
- franchisors that are members of duly registered associations must register their Standard Franchise Agreement with the DTI and execute an undertaking that all future franchise agreements with MSME franchisees incorporate the minimum terms and conditions in Section 2;
- franchisors that are not members of any duly registered franchise associations must register all franchise agreements entered into with MSME franchisees within thirty (30) days from execution.
- Section 3 establishes a DTI-created MSME Registry of Franchise Agreements between a franchisor and an MSME franchisee.
- Section 3 provides that only franchise agreements that incorporate the minimum terms and conditions prescribed under Section 2 may be registered in the MSME Registry.
- Section 3 makes DTI registration an ongoing compliance duty tied to execution (for non-association members) or to maintaining incorporation (through undertakings for association members).
Implementation rules and administration
- Section 6 directs the DTI to formulate and issue implementing guidelines within ninety (90) days from the effectivity of the Order.
- Section 5 requires franchisors with existing franchise agreements with MSMEs to comply with the requirements in Sections 2 and 3 upon renewal of their respective franchise agreements.
- Section 4 encourages franchisors to join duly registered franchise associations, and encourages MSMEs intending to undertake franchising to transact with franchisors belonging to a franchise association.
- Section 5 ties compliance for existing agreements to the renewal stage rather than to the initial term.
Funding, separability, and repealing clause
- Section 7 provides that necessary funding for implementation shall be sourced from the regular appropriations of the DTI.
- Section 7 provides that funding support for succeeding years shall be incorporated in the annual General Appropriations Act, subject to the usual budget process.
- Section 8 contains separability: if any part or provision is held unconstitutional or invalid, other parts not affected remain in full force and effect.
- Section 9 requires repeal or modification: all orders, rules, regulations, issuances, or parts thereof inconsistent with the Order are repealed or modified accordingly.
Effectivity, issuance details, and publication
- Executive Order No. 169 is Executive Order No. 169, signed May 12, 2022 by President Rodrigo Roa Duterte, with Salvador C. Medialdea as Executive Secretary.
- Section 10 provides immediate operational effect upon publication in the Official Gazette or a newspaper of general circulation.
- The Order takes effect immediately after its publication as stated in Section 10.
- Section 1 through Section 9 operate as the substantive framework for franchise agreements with MSME franchisees, with DTI guidelines required by Section 6 within ninety (90) days from effectivity.