The Department of Trade and Industry (DTI) on Wednesday welcomed President Duterte’s issuance of Executive Order (EO) 169, which seeks to protect micro, small and medium enterprises (MSME) and the franchising industry.
Trade Secretary Ramon M. Lopez said EO No. 169 titled “Strengthening the Franchising Industry for the Protection of Micro, Small and Medium Enterprises” underscores the need “to protect these MSME investors from opportunists and scams that take advantage of small entrepreneurs.”
Signed on May 12, 2022, the also EO aims to strengthen the franchising industry to help businesses, especially MSMEs, by developing a transparent and business-friendly environment, and promoting fair and equitable practices.
As the agency mandated to develop and implement policies on regulation of trade, industry and investments, the DTI specified the terms and conditions for franchise agreements.
Among these are: 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.
Further, the full disclosure of any pre-signing, initial or recurring fees, such as but not limited to, franchising fee, promotion fee, royalty fee or any related type of fee, which may be imposed on the MSME franchisee.
In addition, the 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; and the detailed responsibilities of the MSME franchisee; and the non-discriminatory provisions.
On top of these, other policies under the said regulation are: 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.
There is also a provision on “cooling off” period, wherein the MSME is given the option to terminate the agreement.
Another provision is on the 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 trade department clarified that franchisors may refer to the above-mentioned minimum terms and conditions as best practices that can be incorporated into their respective franchise agreements for non-MSMEs franchisees.
Likewise, the DTI is in charge of creating an MSME Registry of Franchise Agreements. According to the EO, the trade department will prepare the implementing rules and regulations for the execution of the said order within 90 days.
“As we enforce consumer protection, we also recognize the need to strengthen the promotion of fair and transparent franchise practices for the benefit and growth of our MSMEs,” the DTI chief said.
Meanwhile, DTI Consumer Protection Group Undersecretary Ruth B. Castelo, for her part, specified, “strong franchisees and ethical franchisors will help promote consumer confidence.”