President Rodrigo Duterte has signed Executive Order No. 169 aiming to strengthen the franchising industry to protect the micro, small, and medium enterprises (MSMEs).
The directive entails the protection of Filipino enterprises against any unfair trade practices and recognizes the necessity of pursuing a ‘trade policy that serves the general welfare, as far as all the franchise agreements under the MSMEs shall be in writing, duly notarized, and contains the following terms and conditions of:
Name and description of the products or services under the franchise;
Has the specific rights granted to the MSME franchise;
Has a full disclosure of any pre-signing, initial, or recurring fees;
Contains a detailed list of the responsibilities of the franchisor and the franchisee;
Duration of the franchise and terms and conditions for renewal;
Effects of and grounds for pre-termination, termination, and the expiration date of the franchise agreement;
Provision on the cooling-off period, whereas the MSME is given the option to terminate the agreement;
The mechanism for dispute resolution; and
Possible remedies of the parties in case of any violation of the terms and conditions of the franchise agreement.
“There is a need to intensify government efforts to strengthen the franchising industry to help businesses, especially MSMEs, by developing a transparent and business-friendly environment, and promoting fair and equitable practices,” the executive order reads.
“For non-MSME franchisees, franchisors may consider the minimum terms and conditions provided herein as best practice, and incorporate the same in their respective franchise agreements,” the EO stated.
The order also says that the compliance of the franchisor in the minimum terms and conditions may entitle them to incentives or benefits from the national government, wherein the Department of Trade and Industry (DTI) will be directed to formulate and enact the measurements for the incentives of the qualified franchisors, as subjected to existing laws, policies, and regulations.
The concerned department is expected to formulate and implement the guidelines within 90 days from the effectiveness of the order.