NextGen Day

MANILA – President Rodrigo R. Duterte has issued an executive order (EO) directing the Department of Trade and Industry (DTI) to establish a Franchise Registry to protect micro, small, and medium-sized businesses (MSMEs).

EO 169, signed by Duterte on May 12, recognizes that the franchising industry is critical to the country’s economic sustainability by creating jobs, increasing consumption, and encouraging tourism.

The EO stated, “There is a need to accelerate government efforts to strengthen the franchising industry in order to assist businesses, particularly MSMEs, by fostering a transparent and business-friendly environment and supporting fair and equitable practices.”

The minimum terms and circumstances of franchise agreements are outlined in Executive Order 169.

Non-MSME franchisees and franchisors can use the offered minimum terms and conditions as a guideline 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.

“All franchise agreements entered into with MSME franchisees must be registered within 30 days of execution by franchisors who are not members of fully recognized franchise groups,” the EO stated.

The EO also mandates that the DTI establish an MSME Registry of Franchise Agreements between a franchisor and an MSME franchisee.

“Only franchise agreements that include the minimal terms and circumstances are eligible for registration,” it noted.

Meanwhile, upon renewal of their respective franchise agreements with MSME franchisees, franchisors with existing franchise agreements with MSMEs must comply with the requirements established in the order.

Within 90 days of the EO 169 taking effect, the DTI must create and issue implementation guidelines.

The necessary cash for the order’s implementation will come from the DTI’s regular appropriations. Future funding support must be included in the yearly General Appropriations Act, which is subject to the ordinary budget procedure.

According to the Philippine Statistics Authority’s (PSA) 2019 Update of the List of Establishments, MSMEs account for 99.5 percent of all enterprises in the Philippines, with franchising accounting for 68 percent.

Any commercial activity or enterprise with a value of PHP50,000 to PHP20 million is classified as an MSME.

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