EO on franchising to promote entrepreneurship

MANILA, Philippines — A recently issued executive order aimed at strengthening  the franchising industry would  promote entrepreneurship and the protection of micro, small and medium enterprises (MSMEs), the Department of Trade and Industry (DTI) said.

Following the issuance of EO 169 on strengthening the franchising industry, Trade Secretary Ramon Lopez said the government wants to ensure the protection of MSMEs as franchising is being promoted as a tried and tested business model for aspiring entrepreneurs.

“We have to protect these MSME investors from opportunists and scams that take advantage of small entrepreneurs. These destroy the image of the franchise industry,” Lopez said.

Through the EO, he said there are prescribed minimum terms and conditions for franchise agreements to protect MSME investors.

The EO seeks to strengthen the franchising industry to help businesses, especially MSMEs, through a transparent and business-friendly environment, as well as fair and equitable practices.

The DTI, which is mandated to develop and implement policies on regulation of trade, industry, and investments, specified the following minimum terms and conditions for franchise agreements: name and description of the products or services under the franchise; specific rights granted to the MSME franchisee including the use of marks or other intellectual property rights duly registered with the Intellectual Property Office of the Philippines; full disclosure of fees which may be imposed on the MSME franchisee; responsibilities of the franchisor and franchisee; non-discriminatory provisions; duration of the franchise and the terms and conditions for renewal; effects of and grounds for pre-termination, termination or expiration of the franchise agreement; provision on “cooling off” period where the MSME is given the option to terminate the agreement; dispute resolution mechanism which would include voluntary mediation under Republic Act 9285 or the Alternative Dispute Resolution Act of 2004; and remedies  in case of any violation of the terms and conditions of the franchise agreement.

Under the EO, franchisors will be responsible for the submission of the franchise agreement to the DTI.

The DTI will create an MSME  Registry of Franchise Agreements.

It will issue the  implementing rules and regulations for the EO within 90 days.

“As we enforce consumer protection, we also recognize the need to strengthen the promotion of fair and transparent franchise practices for the benefit and growth of our MSMEs,” Lopez said.

DTI Consumer Protection Group Undersecretary Ruth Castelo said “strong franchisees and ethical franchisors would help promote consumer confidence.”