Duterte orders new requirements for MSMEs franchise holders

FILE President Rodrigo Roa Duterte. KARL NORMAN ALONZO/PRESIDENTIAL PHOTO

MANILA, Philippines — President Rodrigo Duterte has ordered new requirements for franchise holders of micro, small and medium enterprises (MSMEs), including the registration of franchise agreements and creation of a Franchise Registry.

Duterte has signed Executive Order (EO) No. 169 which provides for the strengthening of the franchise industry for the protection of MSMEs.

Under the EO, franchisors are responsible for registering their franchise agreements with the Department of Trade and Industry (DTI), provided that those who are members of duly registered franchise associations will register with the DTI their standard franchise agreement and execute an undertaking that all future franchise agreements with MSME franchisees will incorporate the minimum terms and conditions prescribed under Section 2 of EO 169.

Section 2 of EO 169 provides for minimum terms and conditions of franchise agreements namely:

-name and description of the products or services under the franchise;

-specific rights granted to the MSME franchisee, such as but not limited to the right to use the mark or any other intellectual property rights duly registered with the Intellectual Property Office of the Philippines (IPOPHL);

-full disclosure of any pre-signing, initial or recurring fees, such as but not limited to, franchise fee, promotion fee, royalty fee or any related type of fee which may be imposed on the MSME franchisee;

-detailed responsibilities of the franchisor which include the enumeration of the types and particulars of assistance and the submission of the franchise agreement to the DTI;

-detailed responsibilities of the MSME 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;

-mechanism for dispute resolution which shall include a stipulation that parties may seek voluntary mediation under Republic Act No. 9285 or the Alternative Dispute Resolution Act of 2004; and

-remedies of the parties in case of any violation of the terms and conditions of the franchise agreement.

The order also mandates that all franchise agreements entered into by and between a franchisor and an MSME franchisee within the country should be in writing and duly notarized.

“Compliance with the inclusion of the foregoing minimum terms and conditions in the franchise agreement may entitle the franchisor to incentives or benefits to be provided by the national government,” EO 169 read.

With this, the DTI is tasked to formulate and enact measures for the entitlement to incentives of qualified franchisors, subject to existing laws, policies and regulations.

The DTI will have to issue such guidelines within 90 days from the effectivity of the order.

Franchisors with existing franchise agreements with MSMEs, meanwhile, will have to comply with these new requirements upon renewal of their respective franchise agreement with MSME franchisees.

A business is considered as an MSME if the value of its assets is within the range of P50,000 to P20 million.

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