Duterte okays EO for creation of MSME franchise registry
PRESIDENT Duterte has signed Executive Order (EO) No. 169 that aims to create a Franchise Registry for the protection of micro, small and medium enterprises (MSMES).
Signed on Thursday, May 12, but released by the Palace to the media on Monday, the EO also seeks to implement a nationwide standardized provisions of franchise agreements.
Under the EO, franchisors must be responsible for registering their franchise agreements with the Department of Trade and Industry (DTI), provided that franchisors that are members of duly registered franchise associations must register with the trade department their standard franchise agreement and execute an undertaking that all future franchise agreements with MSME franchisees must incorporate the minimum terms and conditions prescribed under the order.
“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.
“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 added.
EO 169 also prescribes the minimum terms and conditions of franchise agreements.
NON-MSME franchisees and franchisors may consider the minimum terms and conditions provided as best practice and incorporate the same in their respective franchise agreements.
The EO also directs 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,” the EO read.
Meanwhile, franchisors with existing franchise agreements with MSMES must comply with the requirements prescribed in the order upon renewal of their respective franchise agreement with MSME franchisees.
Also to be included in the franchise agreement are the duration of the franchise and terms and conditions of the renewal; effects of and grounds for pre-termination, termination or expiration of the franchise agreement; provision of the “cooling off” period when the MSME is given the option to terminate the agreement; mechanism for dispute resolution; and remedies of the parties in case of any violation of the terms and conditions of the franchise agreement.
The said agreements with the prescribed minimum standards shall be in writing and duly notarized by the franchisor or by their franchise association, if applicable, before they submit such requirements to the DTI.
Franchisors are also encouraged to become members of duly registered franchise associations.
The DTI will also be mandated to collect the said agreements and create the MSME Registry of Franchise Agreement.
It will then formulate and enact incentives for franchisors, which will comply with the said requirement.
Franchisors, which are not members of duly registered franchise associations, shall register franchise agreements entered into with MSMES franchisees within 30 days from execution.
EO 169 is expected to benefit 68 percent or over 600,000 of the 952,969 MSMES, according to the 2020 data from DTI.
DTI is expected to craft the implementing rules and regulations (IRR) for the issuance 90 days after it takes effect once it is published in the Official Gazette or a newspaper of general circulation.