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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Executive Order No. 169 was issued for purposes of strengthening the franchise industry for the protection of micro, small and medium enterprises (MSME). It prescribed the minimum terms and conditions of franchise agreements as well as the guidelines for its registration.
E.O. No. 169 prescribed the minimum terms and conditions of franchise agreements. It provides that all franchise agreements entered into by and between a franchisor and an MSME franchisee within the Philippines shall be in writing, duly notarized, and shall include the following minimum terms and conditions:
- Name and description of the products or services under the franchise;
- Specific rights granted to 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 shall include the enumeration of the types and particulars of assistance and the submission of the franchise to the DTI;
- Detailed responsibilities of the MSME franchisee;
- Non-discrimination 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 R.A. 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. (Section 2, E.O. No. 169)
Franchisors of non-MSME franchisees may consider the above-mentioned minimum terms and conditions as best practice, and incorporate the same in their respective franchise agreements.
The franchisor may be entitled to incentive or benefits to be provided by the National Government should it comply with the inclusion of the minimum terms and conditions prescribed by E.O. No. 169 in the franchise agreement. For this purpose, the DTI is hereby directed to formulate and enact measures for the entitlement to incentive of qualified franchisors, subject to existing laws, policies and regulations.
Under Section 3 of E.O. No. 169, the franchisors shall be responsible for registering their franchise agreements with the DTI provided that they are members of duly registered franchise associations shall register with the DTI their Standard Franchise Agreement, and execute an undertaking that all future franchise agreements with MSME franchisees shall incorporate the minimum terms and conditions prescribed under Section 2.
On the other hand, franchisors that are not members of any duly registered franchise associations shall register all franchise agreements entered into with MSME franchisees within thirty (30) days from execution thereof.
The DTI is mandated to create an MSME Registry of Franchise Agreements entered into by and between a franchisor and an MSME franchisee.
Only franchise agreements that incorporate the minimum terms and conditions prescribed under E.O. No. 169 may be registered.
Franchisors are encouraged to join duly registered franchise associations, while MSMEs intending to undertake the franchising business are encouraged to transact with franchisors belonging to a franchise association.
Franchisors with existing franchise agreement with MSMEs shall comply with the requirements prescribed in Sections 2 and 3 of E.O. No. 169 upon renewal of their respective franchise agreement with MSME franchisees.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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