Definition of Terms
- Franchise: Contract granting the right to operate a business using franchisor's system and intellectual property, with franchisor control and franchisee compensation.
- Franchise Agreement: Written contract granting rights to offer, sell or distribute goods/services using trademarks, know-how, and commercial symbols for consideration.
- Franchisee: Registered MSME business entity (sole proprietorship, partnership, cooperative, corporation).
- Franchisor: Registered entity granting franchise rights (sole proprietorship, partnership, cooperative, corporation).
- MSME: Enterprises classified by asset value as micro, cottage, small, or medium based on ranges from less than P50,000 to P20 million.
- Person: Natural or juridical entity registered with a government agency.
Minimum Terms and Conditions of Franchise Agreements
- Franchise agreements must be written, notarized, and include:
- Identification of products/services under franchise.
- Specific rights granted, including registered intellectual property.
- Full disclosure of all fees (initial, recurring).
- Detailed franchisor responsibilities and agreement submission to DTI.
- Detailed franchisee responsibilities.
- Non-discrimination clause.
- Duration and renewal terms.
- Grounds and effects for termination or expiration.
- Cooling-off period allowing franchisee termination option.
- Dispute resolution mechanism including voluntary mediation under RA 9285.
- Remedies for contract violations.
- These terms serve as best practices for non-MSME franchise agreements.
- Compliance may entitle franchisors to government incentives through measures formulated by DTI.
Registration of Franchise Agreements and Franchise Registry
- Franchisors must register franchise agreements with DTI.
- Franchisors part of registered associations submit a Standard Franchise Agreement and commit future contracts to minimum terms.
- Non-members register individual agreements with MSME franchisees within 30 days post-execution.
- DTI will create and maintain an MSME Franchise Agreement Registry accepting only compliant agreements.
Encouragement of Franchise Association Membership
- Franchisors are encouraged to join duly registered franchise associations.
- MSMEs are encouraged to transact with franchisors who are association members.
Compliance with Existing Agreements
- Franchisors must comply with minimum terms and registration requirements upon renewal of current agreements with MSMEs.
Implementing Guidelines and Funding
- DTI must issue implementing guidelines within 90 days from effectivity.
- Funding is sourced from DTI's regular appropriations and included in subsequent budgets.
Legal and Administrative Provisions
- Unconstitutional or invalid provisions are severable, allowing remaining parts to remain effective.
- Repeal of inconsistent prior orders, rules, or regulations.
- Immediate effectivity upon publication in the Official Gazette or general circulation newspaper.