A franchise is an arrangement where a franchisor grants a franchisee the right to operate a business using the franchisor's brand, trademarks, business system, and know-how, in exchange for fees. There is no single 'Franchise Law' in the Philippines that comprehensively regulates franchising; instead, a franchise agreement is governed by the general law on contracts, intellectual property law (for the trademarks and trade secrets), and relevant regulations. The franchise agreement is the heart of the relationship, and it typically covers: the grant of rights and the territory; the term and renewal; the initial franchise fee and ongoing royalties (often a percentage of sales) and advertising contributions; the franchisor's obligations to provide training, systems, and support; the franchisee's obligations to follow the operations manual, maintain standards, and use approved suppliers; restrictions such as non-competition and confidentiality; and the grounds and consequences of termination. Because franchise agreements are usually drafted by the franchisor and are heavily one-sided, a prospective franchisee should review the terms carefully — especially the fees, the territorial protection, the renewal and termination provisions, and post-termination restrictions — ideally with legal advice, before signing. The franchisee should also do due diligence on the franchisor's track record and the true costs. So a franchise offers a proven system, but the agreement binds the franchisee tightly, making careful review essential.
What a Franchise Is
A franchise grants the right to operate using the franchisor's brand, system, and know-how for fees. There is no single Franchise Law — it is governed by contract and IP law.
Key Contract Terms
- Grant of rights and territory; term and renewal;
- Franchise fee, royalties, and advertising contributions;
- Franchisor's training and support vs. franchisee's duty to follow the operations manual; and
- Non-competition, confidentiality, and termination terms.
Review Before Signing
Franchise agreements are franchisor-drafted and one-sided. Review the fees, territorial protection, renewal/termination, and post-termination restrictions carefully — with legal advice — and do due diligence on the franchisor.
Practical Takeaways
- A franchise = brand + system for fees and royalties;
- No single law — the contract governs, so read it closely;
- Check fees, territory, renewal, termination before signing.
Frequently Asked Questions
Is there a Franchise Law in the Philippines? No single comprehensive Franchise Law. A franchise agreement is governed by the general law on contracts, intellectual property law for the trademarks and know-how, and relevant regulations.
What does a franchise agreement typically contain? The grant of rights and territory, the term and renewal, the franchise fee, royalties, and advertising contributions, the franchisor's support obligations, the franchisee's operational duties, and termination terms.
What should I check before signing a franchise agreement? Especially the fees, territorial protection, renewal and termination provisions, and post-termination restrictions like non-competition, ideally with legal advice, plus due diligence on the franchisor.
What does a franchisee typically pay? Usually an initial franchise fee and ongoing royalties, often a percentage of sales, and sometimes advertising or marketing contributions.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.