PRESIDENT Rodrigo Duterte has inked an executive order (EO) ordering the Department of Trade and Industry (DTI) to establish a Franchise Registry for the protection of micro, small and medium enterprises (MSMEs).
Duterte in approving EO 169 said that the franchising industry is vital to the country’s economic sustainability by generating job opportunities, increasing consumption, and fostering tourism.
“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 EO read.
The minimum terms and conditions of franchise agreements are outlined in EO 169.
Non-MSME franchisees and franchisors should regard the minimum terms and conditions specified as best practice and include them in their franchise agreements.
The EO requires franchisors to register their franchise agreements with the DTI, with the exception of franchisors who are members of duly registered franchise associations, who must register their standard franchise agreement with the DTI and sign an undertaking that all future franchise agreements with MSME franchisees must include the minimum terms and conditions prescribed by the order.
“Franchisors that are not members of duly registered franchise associations must register all franchise agreements entered into with MSME franchisees within 30 days from execution,” the EO read.
Moreover, the EO orders the DTI 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 may be registered,” it added.
Meanwhile, franchisors with existing franchise agreements with MSMEs must follow the standards outlined in the order upon renewal of their franchise agreements with MSME franchisees.
Within 90 days from the enactment of EO 169, the DTI shall develop and release implementation guidelines.
The needed funds for the order’s implementation will be sourced from the DTI’s regular appropriations. Funding assistance for subsequent years must be included in the annual General Appropriations Act, in accordance with the standard budgeting procedure.
Based on the Philippine Statistics Authority (PSA) 2019 Update of the List of Establishments, 99.5 percent of businesses in the Philippines are MSMEs, 68 percent of which are into franchising.
An MSME refers to any enterprise or commercial activity with a value between PHP50,000 to PHP20 million.
