{"id":149942,"date":"2026-10-07T11:19:55","date_gmt":"2026-10-07T11:19:55","guid":{"rendered":"https:\/\/www.legal500.com\/guides\/?post_type=comparative_guide&#038;p=149942"},"modified":"2026-10-07T11:33:11","modified_gmt":"2026-10-07T11:33:11","slug":"philippines-franchise-licensing","status":"publish","type":"comparative_guide","link":"https:\/\/www.legal500.com\/guides\/chapter\/philippines-franchise-licensing\/","title":{"rendered":"Philippines: Franchise &amp; Licensing"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-149942","comparative_guide","type-comparative_guide","status-publish","hentry","guides-franchise-licensing","jurisdictions-philippines"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Cruz Marcelo &amp; Tenefrancia<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/Logo-Full-Color-Vertical.png\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Cruz Marcelo &amp; Tenefrancia<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/www.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2019\/03\/Logo-Full-Color-Vertical.png\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Franchise &amp; Licensing laws and regulations applicable in Philippines<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a legal definition of a franchise and, if so, what is it?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Philippines does not have a single comprehensive law that regulates franchising nor defines it. However, Executive Order (EO) No. 169 on \u201cStrengthening the Franchising Industry for the Protection of Micro, Small and Medium Enterprises\u201d defines a \u201cfranchise\u201d as \u201ca contract or agreement between a franchisor and a franchisee where: (i) the franchisor grants to the franchisee the right to operate a business according to the franchise system and during a term as determined by the franchisor; (ii) the franchisor grants the franchisee the right to use a mark, or a trade secret, or any confidential information or intellectual property owned by the franchisor or relating to the franchisor; (iii) the franchisor possesses the right to control the administration over the franchisee\u2019s business operation during the franchise in accordance with the franchise system; and (iv) in return for the grant of the above rights, the franchisee is required to pay a fee or other form of consideration\u201d.<\/p>\n<p>Moreover, in EO No. 169, a \u201cfranchise agreement\u201d is defined as \u201ca written contract or agreement between a franchisor and a franchisee by which the former grants the latter the right to engage in the business of offering, selling or distributing goods or services under a marketing system, technology transfer arrangements (\u201cTTA\u201d) included, for a certain consideration. Unless otherwise provided, said right includes the use of a trademark, service mark, trade name\/business name, know-how, logo-type advertising or other commercial symbols associated with a particular business\u201d.<\/p>\n<p>Additionally, Philippine Department of Trade and Industry (\u201cDTI\u201d) Bureau Order No. 10-24, or the Advisory on Due Diligence to be Undertaken by a Prospective Franchisee, defines a \u201cfranchise agreement\u201d as \u201ca written contract or agreement between two or more parties by which a Franchisor grants the Franchisee right to engage in the business of offering, selling, or distributing goods or services under a marketing plan\/system\/concept, for a certain consideration. Unless otherwise provided, said right includes the use of a trademark, service mark, trade name\/business name, know-how, logo-type advertising, or other commercial symbols associated with a particular business\u201d.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any structuring considerations for foreign franchisors (e.g. use of master franchisees, local presence requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As juridical entities, franchisors and franchisees must have the requisite registrations in their country of origin to have the legal capacity to enter into franchise agreements. In the Philippines, domestic corporations must be registered with the Philippine Securities and Exchange Commission (\u201cSEC\u201d) and comply with post-registration requirements, such as registration of the taxpayer with the Philippine Bureau of Internal Revenue (\u201cBIR\u201d) and securing a business permit with the city or municipality where the corporation conducts its business.<\/p>\n<p>The use of master franchises are common in the Philippines, but existing laws neither explicitly require nor prohibit them.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any requirements that must be met prior to the offer and\/or sale of a franchise? If so, please describe and include any potential consequences for failing to comply.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no Philippine laws or regulations on any requirements that must be met prior to the offer and\/or sale of a franchise.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any registration requirements for franchisors and\/or franchisees? If so, please describe them and include any potential consequences for failing to comply. Is there an obligation to update existing registrations?  If so, please describe.  Are there any practical or timing implications (e.g. typical registration timelines, delays in practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>TTA<\/strong><\/p>\n<p>Franchise agreements fall under the definition of TTA under Section 4.2 of the Intellectual Property Code of the Philippines (\u201cIP Code\u201d). TTA are defined as \u201ccontracts or agreements, involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or rendering of a service including management contracts; and the transfer, assignment or licensing of all forms of intellectual property rights, including licensing of computer software except computer software developed for mass market\u201d.<\/p>\n<p>Notably, not all contracts involving the licensing of IP rights will be considered TTA. Rule 1 (n) of Philippine Intellectual Property Office (\u201cIPOPHL\u201d) Memorandum Circular No. 2020-002 further qualifies the definition of TTA, providing that the \u201ctransfer, assignment or licensing of intellectual property rights will be considered [TTA] only if [they involve] the transfer of systematic knowledge\u201d.<\/p>\n<p>The term \u201csystematic knowledge\u201d is not specifically defined under local regulation or jurisprudence. Thus, it remains subject to interpretation. However, the World Intellectual Property Organization has stated that technology licensing is not necessarily synonymous with technology transfer as the latter requires an actual transfer of technology and knowledge by the licensor to the licensee, who learns how to effectively use, adapt and improve such technology and knowledge. In view of the foregoing, franchise agreements are considered TTA as they involve the transfer of systematic knowledge. Thus, the agreement must not contain any of the prohibited clauses under Section 87 of the IP Code and must comply with the mandatory clauses under Section 88 of the IP Code.<\/p>\n<p><strong>Registration of TTA and Franchise Agreements<\/strong><\/p>\n<p>Generally, TTA and franchise agreements do not need to be registered with the Documentation, Information and Technology Transfer Bureau (\u201cDITTB\u201d) of the IPOPHL if they comply with the provisions on voluntary licensing, particularly the prohibited and mandatory clauses under Sections 87 and 88 of the IP Code.<\/p>\n<p>However, non-compliance with any of the provisions of Sections 87 and 88 of the IP Code shall automatically render the franchise agreement unenforceable, unless an application for exemption has been filed with the DITTB and subsequently granted, and the franchise agreement is approved and registered with the DITTB.<\/p>\n<p>Unenforceability, in this context, has been interpreted to mean that neither party will be allowed to have any legal recourse against the other in court in case of breach of contract. The Civil Code of the Philippines (\u201cCivil Code\u201d) states that contracts deemed \u201cunenforceable\u201d are considered valid and binding as between the parties who entered into them but may not be invoked against third persons. Additionally, in case there is a breach of such contract, neither party can go to court to enforce the contract\u2019s terms.<\/p>\n<p>A separate registration process is not required for each store opened by the same franchisee if its establishment is covered by the agreement approved by and\/or registered with the DITTB. Thus, as long as the business endeavor (i.e., the creation of stores) is contemplated by the agreement between the parties as approved by and\/or registered with the DITTB, only a single registration is required, regardless of the number of stores. Further, the updating of the registration is not required provided that the franchise agreement as approved by the DITTB remains the same. However, IPOPHL Memorandum Circular No. 2020-002 provides that registrations have a maximum validity of ten (10) years, which shall in no case exceed the effectivity of the TTA.<\/p>\n<p><strong>Exemption from Registration<\/strong><\/p>\n<p>Section 91 of the IP Code provides that the parties may seek exemption from the application of Sections 87 and 88 by filing a request with the DITTB. Such exemption may be granted only in exceptional and meritorious cases where the arrangement will bring substantial benefits to the economy, such as high technology content, increase in foreign exchange earnings, employment creation, regional dispersal of industries and\/or substitution with or use of local raw materials or, in the case of Board of Investments, registered companies with pioneer status.<\/p>\n<p><strong>Trademark License Agreements<\/strong><\/p>\n<p>Since franchise agreements generally involve the licensing of trademarks, they must likewise be recorded with the Bureau of Trademarks (\u201cBOT\u201d) of the IPOPHL to be valid against third parties. To record the trademark license agreement with the BOT, the DITTB must first issue a Certificate of Compliance certifying that the trademark license agreement is cleared for recordal with the BOT.<\/p>\n<p><strong>Estimated Timeframe<\/strong><\/p>\n<p>Upon filing a request for Certificate of Clearance\/Registration\/Compliance, the DITTB is mandated to act on the same within twenty (20) working days from the filing date. Should the DITTB issue a favorable decision, it shall cause the issuance of the appropriate certificate (i.e. Certificate of Clearance for trademark license agreements or Certificate of Registration\/Compliance for TTA) within seven (7) days from receipt of the duly executed and notarized agreement and payment of the required fees. However, these periods do not account for possible delays on the part of the DITTB.<\/p>\n<p>Should any provision of the agreement violate any of the provisions on voluntary licensing under the IP Code, the DITTB shall issue a Notice of Findings and Notice to Comply. The Notice shall inform the parties of any violation and require them to respond and comply with the orders contained therein. Upon the parties\u2019 satisfactory response to the findings of the DITTB and their subsequent compliance, the DITTB shall issue the appropriate certificate within seven (7) days from receipt of the duly executed and notarized agreement and payment of the required fees.<\/p>\n<p>For trademark license agreements, once the Certificate of Clearance is issued, we may then file the request for recordal with the BOT. The estimated processing time for such request is around three (3) to six (6) weeks.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements (franchise specific or in general)? If so, please describe them (i.e. when and how must disclosure be made (is there a minimum disclosure period before signing or payment (e.g. cooling-off period)), is there a prescribed format, must it be in the local language, do they apply to sales to sub-franchisees) and include any potential consequences for failing to comply.   Is there an obligation to update and\/or repeat disclosure (for example in the event that the parties enter into an amendment to the franchise agreement or on renewal)? What are the consequences of late or incomplete disclosure?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>DTI Bureau Order No. 10-24 advises prospective franchisees to secure from the franchisor Disclosure Information, consisting of information regarding its corporate existence and franchise operations, among others, as part of its due diligence measures before deciding to engage in or acquire a franchise business.<\/p>\n<p>Nevertheless, this is merely an advisory issuance and does not impose an obligation on the part of the franchisor to provide Disclosure Information. It also does not indicate a prescribed manner or format by which the information should be disclosed to the requesting franchisee. There are also no statutory minimum disclosure periods applicable to franchise transactions, and no Philippine laws or regulations which prescribe a specific statutory penalty for late or incomplete disclosure.<\/p>\n<p>Nevertheless, general contract remedies under the Civil Code may apply where non-disclosure or misrepresentation affects the franchisee\u2019s consent.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If the franchisee intends to use a special purpose vehicle (SPV) to operate each franchised outlet, is it sufficient to make disclosure to the SPVs' parent company or must disclosure be made to each individual SPV franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no disclosure requirements for the operation of franchised outlets by SPVs. There is also nothing prohibiting parent companies from using its subsidiaries or affiliates to operate franchised outlets in the Philippines, in which case there are likewise no disclosure requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What actions can a franchisee take in the event of mis-selling by the franchisor?  What are the main legal grounds for such claims (e.g. misrepresentation, statutory disclosure breaches, unfair commercial practices)?  To what extent can liability be excluded or limited by non-reliance or entire agreement clauses or disclaimers in the franchise agreement, disclosure document or sales material?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In the absence of a standalone franchise law in the Philippines, the general law on contracts shall apply. Thus, if the consent of the franchisee is vitiated by mistake, violence, intimidation, undue influence or fraud, the franchisee may have the contract annulled under Article 1390 of the Civil Code, despite a disclaimer in the franchise agreement, disclosure document, or sales material.<\/p>\n<p>The franchisee may alternatively or additionally seek damages under Article 1170 of the Civil Code where the franchisor\u2019s fraud relates to the performance of its contractual obligations.<\/p>\n<p>While non-reliance and entire agreement clauses are generally enforceable as an exercise of the freedom to contract, they cannot validly exclude liability for fraud. Article 1171 of the Civil Code voids any waiver of future fraud, and Article 1409 of the Civil Code renders void any stipulation contrary to law, morals, or public policy. A franchisor cannot rely on a disclaimer, non-reliance clause, or any agreement clause to exclude liability where the franchisee\u2019s consent was procured through fraud or misrepresentation. However, if the franchisee has been made aware of facts and circumstances which requires the conduct further due diligence, it may be construed as implied acquiescence or consent.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Would it be legal to issue a franchise agreement on a non-negotiable, \"take it or leave it\", basis?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no prohibitions on the issuance of a franchise agreement on a non-negotiable, \u201ctake it or leave it\u201d basis. A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is as binding as ordinary contracts because the party who adheres to the contract is free to reject it entirely. Nevertheless, its validity or enforceability is dependent on the peculiar circumstances and the situation of the parties concerned [Dio v. St. Ferdinand Memorial Park, Inc., G.R. No. 169578 (2006)].<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How are trademarks, know-how, trade secrets and copyright protected in your country?  Are there any specific requirements or risks relating to the licensing of know-how and trade secrets in a franchise context?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Trademark rights and protection are acquired through registration made validly in accordance with the provisions of the IP Code. However, trade names are protected, even prior to or without registration, against any unlawful act committed by third parties. Meanwhile, literary and artistic works are protected by copyright from the moment of their creation even without registration.<\/p>\n<p>Similarly, undisclosed information, which may include trade secrets and know-how, are likewise granted protection even without registration. However, since trade secret protection in the Philippines depends on the information remaining confidential in fact, rather than on any registration or formal grant, the principal risk in a franchise context is leakage or misuse by the franchisee, its employees, or sub-franchisees, particularly upon termination of the relationship.<\/p>\n<p>In this regard, the minimum measures which must ideally be taken by the owner to keep the information secret are as follows:<\/p>\n<p>a) Entering written confidentiality or non-disclosure agreements with employees, contractors, and any third parties (e.g., vendors, partners, and potential investors) who might encounter the information, as well as standalone Non-Disclosure Agreements governing specific disclosures if the information is shared with outside parties for particular business purposes;<\/p>\n<p>b) Conducting exit interviews for departing employees to reiterate the continuing obligation of confidentiality;<\/p>\n<p>c) Restricting access to only those who genuinely need it or on a \u201cneed to know\u201d basis, such as by requiring password protection, encryption, restricted file permissions, physical safeguards like locked cabinets or badge-access rooms for anything in hard copy, and logging persons who access sensitive files;<\/p>\n<p>d) Clearly labeling or marking information as confidential or proprietary, since unmarked information is harder to argue was treated as secret; and<\/p>\n<p>e) Instituting and enforcing internal policies, such as an employee handbook section or a dedicated trade secret policy, explaining what counts as confidential and how it should be handled.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any franchise specific laws governing the ongoing relationship between franchisor and franchisee? If so, please describe them, including any terms that are required to be included within the franchise agreement.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are currently no franchise-specific laws or government agencies exclusively regulating the ongoing relationship between the franchisor and the franchisee. The relationship between franchisor and franchisee is governed by a number of different laws, such as the Civil Code provisions on contracts; the IP Code; EO No. 169; the Philippine Competition Act (\u201cPCA\u201d), which codifies the competition policy of the Philippines; the Consumer Act of the Philippines, which applies to certain aspects of franchising related to product quality, labelling and advertising for consumer protection; the Revised Corporation Code, which is the primary law applying to corporations with respect to establishing and structuring a franchising entity; the Labor Code of the Philippines, which governs the labor standards and relations of franchise personnel; the National Internal Revenue Code, which provides for tax rates and the procedure for tax registration and compliance; the Local Government Code, which provides for the substantive requirements, such as permits and fees, which businesses must comply with in the localities where they intend to operate; and the Data Privacy Act of 2012, which regulates the processing of personal information for the protection of the right to privacy.<\/p>\n<p>The franchise industry in the Philippines also self-polices its own ranks through franchise associations, such as the Philippine Franchise Association (\u201cPFA\u201d). The PFA is a self-regulating governing body for franchising in the Philippines and a private association which is not connected with the government. Membership therein, or in any franchise association, is purely voluntary.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any aspects of competition law that apply to the franchise transaction (i.e. is it permissible to prohibit online sales or use of online marketplaces (e.g. Amazon, third-party platforms), insist on exclusive supply, fix or set maximum retail prices, operate dual distribution\/hybrid franchisor models)? If applicable, provide an overview of the relevant competition laws.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Parties may freely establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy. This aligns with the general principle of freedom to contract under Article 1306 of the Civil Code, which permits parties to agree on terms and conditions they consider appropriate provided these do not violate law, morals, good customs, public order or public policy.<\/p>\n<p>The parties\u2019 freedom to stipulate in TTA is subject to Section 87 of the IP Code, which enumerates prohibited clauses that are prima facie deemed to have anti-competitive effects, as well as Section 88 which enumerates the mandatory clauses. While clauses prohibiting online sales or mandating certain business models are generally permissible as long as they do not have the effect the effect of hampering competition, tie-in purchases and price fixing are among the prohibited clauses expressly enumerated under Section 87.<\/p>\n<p>Apart from complying with Section 87 of the IP Code, the franchise agreement must likewise not violate Philippine competition laws. The PCA prohibits anti-competitive agreements and specific restrictive contractual practices (such as price-fixing, market allocation, and unfair trade restrictions) when these significantly prevent, restrict or lessen competition. It also prohibits the imposition of restrictions on the contract for sale of goods or services where the object or effect of the restrictions is to prevent, restrict or lessen competition substantially. However, it expressly permits \u201cpermissible franchising, licensing, exclusive merchandising, or exclusive distributorship agreements\u201d, provided they do not result in a substantial anti-competitive effect.<\/p>\n<p>Notably, as discussed above, Section 91 of the IP Code allows parties to apply for an exemption from the requirements of Sections 87 and 88 by submitting a request to the DITTB. This exemption may be granted only in exceptional and meritorious cases where the agreement is shown to provide significant benefits to the economy, such as high technology content, increase in foreign exchange earnings or employment creation, among others.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any ESG, compliance or supply chain-related legal requirements impacting franchise systems?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no specific ESG, compliance, or supply chain-related legal requirements which must be specifically adhered to by franchises. However, Section 87 of the IP Code prohibits clauses in franchises agreements which require the licensee to source capital goods, intermediate products, raw materials or other technologies exclusively from a specified supplier, or to permanently employ personnel designated by the licensor, as well as provisions that are considered prima facie to have an adverse effect on competition and trade. The rule of thumb is that restrictive clauses are not allowed if they would result in substantial anti-competitive effects in the market.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are in-term non-compete and non-solicitation clauses enforceable and are there any limitations on the franchisor's ability to impose and enforce them?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In-term and post-term non-compete and non-solicitation clauses are generally enforceable in the Philippines and are not necessarily void for constituting restraint of trade, as long as there are reasonable limitations as to time, trade and place. The \u201creasonableness\u201d of such limitations are typically assessed on a case-to-case basis.<\/p>\n<p>For instance, the IPOPHL has previously allowed non-compete clauses for a period limited to one year from the termination of the agreement. In Blue Sky Holdings Limited v. DITTB, IPOPHL Appeal No 05-2012-0001 (30 April 2013), the IPOPHL ruled that a non-compete clause for a period of two years following the termination of the franchise agreement is a prohibited anti-competitive clause. In this case, the IPOPHL stated that, while a request for exemption may be granted by the DITTB on a case-to-case basis, the franchisor failed to provide evidence of substantial benefits that will accrue to the economy as a result of the agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there an obligation (express or implied) to deal in good faith in franchise relationships?  If so, what practical effects does this have on the relationship between franchisor and franchisee?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 1159 of the Civil Code expressly states that \u201cobligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.\u201d A party who acts in bad faith may be held liable for damages under Article 1170 of the Civil Code.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any employment or labour law considerations that are relevant to the franchise relationship? Is there a risk that the staff of the franchisee could be deemed to be the employees of the franchisor? What level of operational control may a franchisor exercise without creating employment or agency risk?  What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Philippine jurisprudence, the Four-Fold Test is used to determine whether an employer-employee relationship exists between two parties. In Menandros v. Lazada E-Services Phil., Inc., G.R. No. 257821 (19 August 2024), the Philippine Supreme Court explained that, under the test, the following factors must be established: (1) the employer\u2019s selection and engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the employee\u2019s conduct.<\/p>\n<p>Of these four, the power of control is the most essential factor, and it need not be exercised by the employer; it is sufficient that the right is present. In Royale Homes Marketing Corp. v. Alcantara, G.R. No. 195190 (28 July 2014), the Court stated that the power of control is where the person for whom the services are performed reserves the right to control not only the end to be achieved but also the means by which such end is achieved, and the power of control is so determinative of the presence of an employer-employee relationship that it may prove the same even in the absence of the other factors.<\/p>\n<p>In Tesoro v. Metro Manila Retreaders, Inc., G.R. No. 171482 (12 March 2014), it was explained that imposing uniformity in prices, quality of service, and good business practices are not the kind of control contemplated in labor law; it instead addresses the details of day-to-day work, such as task assignments, monitoring of how tasks are performed, and determining the time during which an employee must report to work and accomplish the assigned task.<\/p>\n<p>Thus, to avoid any risk that the franchisor may be considered the employer of the franchisee, there must be a clear delineation of the extent of the franchisor\u2019s authority under the Franchise Agreement, such that it may not be interpreted as control as understood under Philippine labor law. Any power of the franchisor to direct the acts of the franchisee must not be so overarching as to determine the means of achieving the intended outcome of the work, such as exerting control over the day-to-day business of the franchisee.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a risk that a franchisee could be deemed to be the commercial agent of the franchisor? What steps can be taken to mitigate this risk?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 1868 of the Civil Code defines the contract of agency as one whereby a person binds himself to render some service or to do something in representation for or on behalf of another with the consent or authority of the latter. Thus, as agency is principally a matter of contract, it must be clear from the franchise agreement that the franchisee is not an agent of the principal.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws and regulations that affect the nature and payment of royalties to a foreign franchisor and\/or how much interest can be charged? Are there any requirements for payments in connection with the franchise agreement to be made in the local currency?  Are there any restrictions on structuring payments (e.g. royalties vs service fees vs mark-ups)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Currently, there are no specific laws and regulations that impose restrictions on the payment of franchise fees, royalties, or service fees. No set standards are provided under Philippine law and jurisprudence regarding a reasonable range or cap on the amount of franchise fees, royalties, or service fees to be paid. In any event, the general rules on contract law apply, wherein parties may freely establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.<\/p>\n<p>While there are no statutory or jurisprudential standards for the payment of franchise fees, royalties or service fees, there are industry standards for each sector that may serve as benchmarks for franchisors and franchisees in assessing the reasonableness of the rates.<\/p>\n<p>The parties to a franchise contract may stipulate on the currency used to settle an obligation or transaction, in accordance with Republic Act No. 8183.<\/p>\n<p>With regard to interest, Article 1956 of the Civil Code states that no interest shall be due unless expressly stipulated in writing. With respect to the amount of interest that may be charged, the suspension of the effectivity of the Usury Law through the Monetary Board\u2019s CB Circular No. 905-82 allows the parties to agree to any amount of interest. However, such agreed upon interest rates must still be reasonable and fair; else, the courts may intervene to nullify any interest rate held to be excessive or unconscionable, as the Supreme Court has done so in Manila Credit Corporation v. Viroomal, G.R. No. 258526 (11 January 2023).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to impose contractual penalties on franchisees for breaches of restrictive covenants etc.? If so, what requirements must be met in order for such penalties to be enforceable?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 1226 of the Civil Code permits parties to impose contractual penalties for breach of contract. In such case, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary.<\/p>\n<p>Generally, the parties may freely establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In case of the imposition of interest as part of the contractual penalty, the same must be in accordance with usury laws. Since the effectivity of the Usury Law is suspended, the lender and borrower may agree on the interest, provided that the same is not unconscionable.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What tax considerations are relevant to franchisors and franchisees? Are franchise royalties subject to withholding tax?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>Value-Added Tax (\u201cVAT\u201d)<\/strong><\/p>\n<p>The Philippine National Internal Revenue Code, as amended (\u201cNIRC\u201d) imposes a VAT equivalent to 12% of gross receipts derived from the sale, barter, exchange, or lease of goods or properties. The licensor is liable to pay the VAT if such licensor transfers or leases the right to use intellectual property in the course of trade or business. The transaction is subject to VAT irrespective of the place where the license agreement is executed, provided that the property is leased or used in the Philippines.<\/p>\n<p><strong>Final Tax on Royalties<\/strong><\/p>\n<p>The NIRC also imposes a final tax on royalties, the rate of which depends on the taxpayer involved, i.e., an individual, a non-resident alien not engaged in trade or business in the Philippines, a domestic corporation, and a non-resident foreign corporation.<\/p>\n<p>Additionally, it is mandatory that the Philippine taxes relating to the same be borne by the licensor pursuant to Section 88.4 of the IP Code.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">How is e-commerce regulated and does this have any specific implications on the relationship between franchisor and franchisee?  For example, can franchisees be prohibited or restricted in any way from using e-commerce in their franchise businesses?  Are there any rules regarding online sales within or outside a franchisee\u2019s territory?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The specific terms in franchise\/license agreements relating to e-commerce are subject to the agreement of the parties, provided that such terms are not contrary to law, morals, good customs, public order, or public policy. Thus, parties may stipulate whether using e-commerce in the franchise business is allowed or prohibited. In any event, if the parties opt to allow using e-commerce in franchise business, it shall be subject to regulatory requirements. The Internet Transactions Act (\u201cITA\u201d) outlines the obligations of e-commerce platforms, online sellers, and online customers. Thus, if the franchise business also involves the use of e-commerce platforms, it must comply with the ITA, including the responsibilities of an online merchant, such as procuring the necessary permits for regulated products and ensuring that the products delivered to the customer are complete and their quality, type, and condition are as advertised. Notably, the ITA has extraterritorial application. Thus, a person or entity who engages in e-commerce in the Philippine market, shall be subject to applicable Philippine laws and regulations and cannot evade legal liability in the Philippines despite lack of legal presence in the country.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the applicable data protection laws and do they have any specific implications for the franchisor\/franchisee relationship?   In particular, what are the key data protection considerations in a franchise relationship, including: (a) allocation of controller\/processor roles; (b) use of customer databases; (c) cross-border data transfers; and (d) marketing and CRM activities?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The primary governing law with respect to data protection in the Philippines is Republic Act No. 10173, or the Data Privacy Act of 2012.<\/p>\n<p>The parties should: (1) determine, based on their actual roles, whether each acts as a personal information controller (PIC), personal information processor (PIP), or neither; (2) govern access to and use of customer databases in line with lawful basis, purpose limitation, retention, and data-sharing requirements; (3) implement appropriate safeguards for cross-border transfers and third-party processing; and (4) ensure that marketing and CRM activities rest on a proper lawful basis, are supported by adequate privacy notices, and include effective opt-out mechanisms. A dedicated data protection clause or schedule should address these matters, including security, breach notification, data subject rights, and obligations upon termination of the franchise.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the franchisor permitted to restrict the transfer of (a) the franchisee's rights and obligations under the franchise agreement or (b) the ownership interests in the franchisee?  Can the franchisor impose conditions on transfers (e.g. approval rights, fees, qualification criteria)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A franchisor is allowed to impose limitations on the transfer of the franchisee\u2019s rights and obligations or the ownership interest in the franchise, as Philippine law does not expressly prohibit the same. Similarly, the franchisor may also impose conditions to such transfers provided that they are not contrary to law, morals, good customs, public order, or public policy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">To what extent can a franchisor impose audit rights, reporting obligations, and operational controls on a franchisee, and what legal limits apply?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Section 150 of the IP Code, a licensor of a trademark is mandated to provide for effective control over the quality of the goods or services in connection with which the mark is used. If there is no such provision, or the quality control is not effectively carried out, the license contract shall not be valid. In including quality control provisions, the franchisor is given wide latitude in determining the proper terms and conditions of the franchise arrangement for as long as the clauses are not contrary to law, morals, good customs, public order, or public policy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a franchisee have a right to request a renewal on expiration of the initial term? In what circumstances can a franchisor refuse to renew a franchise agreement? If the franchise agreement is not renewed or it if it terminates or expires, is the franchisee entitled to compensation? If so, under what circumstances and how is the compensation payment calculated?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In general, all contractual terms are subject to the agreement of the parties. These include the grounds for termination and procedural requirements, including matters such as survival of terms, extension or renewal of the agreement, and filing requirements or other termination formalities. The parties may stipulate that the agreement can be terminated on the ground of default, as well as what are deemed events of default and the effects of such events of default, for instance, by adopting an automatic termination clause.<\/p>\n<p>Franchising, licensing, exclusive merchandising and distributorship agreements which give each party the right to unilaterally terminate the agreement are likewise permissible under the PCA. However, Section 57 of the Financial Rehabilitation and Insolvency Act of 2010 provides that a license cannot be unilaterally terminated on the ground of mere insolvency of the licensee or licensor and will remain valid and effective despite a subsequent declaration of the insolvency of either or both parties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any mandatory termination rights which may override any contractual termination rights? Is there a minimum notice period that the parties must adhere to?  Are there any requirements regarding notice periods and opportunities to remedy breaches before termination?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As discussed in Item 18 above, the grounds for termination and procedural requirements are subject to the agreement of the parties, provided that they are not contrary to law, morals, good customs, public order, or public policy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any intangible assets in the franchisee's business which the franchisee can claim ownership of on expiry or termination, e.g. customer data, local goodwill, etc.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Post-termination or post-expiry terms are generally subject to the agreement of the parties, provided that such terms must not be contrary to law, morals, good customs, public order, or public policy. However, the IP Code provides that clauses which restrict the use of the technology supplied after the expiration of the agreement are prohibited, except in cases of early termination of the TTA due to reason(s) attributable to the licensee.<\/p>\n<p>Moreover, pursuant to the standard confidentiality clauses in franchise\/license agreements, trade secrets and other confidential information, which may include customer data, are not retained by the franchisee upon expiration or termination of the franchise\/license agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What post-termination obligations are typically enforceable (e.g. de-branding, return of confidential information, non-compete, non-solicitation) and how readily are such post-term restrictions enforced in practice?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Post-termination or post-expiry terms are generally subject to the agreement of the parties, provided that such terms must not be contrary to law, morals, good customs, public order, or public policy. Accordingly, post-termination or post-expiry terms must comply with the IP Code. Should any of such terms violate Section 87 of the IP Code, it becomes unenforceable, unless an application for exemption is applied for and approved by the DITTB.<\/p>\n<p>In practice, provisions that are immediately enforceable generally involve the return of confidential information, de-branding, and non-use of the franchisor\u2019s intellectual property, as these terms are typically implemented as soon as an agreement is terminated. These rights or obligations may be readily enforced upon satisfactory showing of valid and subsisting intellectual property rights and the rightful termination of the agreement.<\/p>\n<p>Other clauses, however, such as the non-compete and non-solicitation clauses, kick in only when certain conditions agreed upon by the parties arise, subject to reasonable limitations on their enforceability such as to time, trade, and place, as the Supreme Court has held in Daisy B. Tiu v. Platinum Plans Phil., Inc., G.R. No. 163512 (28 February 2007) regarding a labor non-compete clause. Based on experience, the IPOPHL only allows non-compete clauses for a period limited to one year from the termination of the agreement, subject to the condition that a request for exemption is filed. Absent compliance with the foregoing, the non-complete clause is unenforceable. Further, due to the nature of the violations, the breach of non-compete and non-solicitation clauses will likewise require evidence gathering which may not be readily accessible to the aggrieved party and therefore may present practical challenges in enforcement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a national franchising association? Is membership required?  If not, is membership commercially advisable? What are the additional obligations of the national franchising association?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As stated in item 10 above, the PFA is a franchise association in the Philippines where membership is purely voluntary. Nevertheless, membership in the PFA may be beneficial since it adds credibility to the franchise business and guarantees the franchise\u2019s clientele that it adheres to the Fair Franchising Standards implemented by the PFA and adhered to by its members. Further, it gives the business a platform for expansion opportunities and can provide support to the business in case of issues relevant to the business\u2019 sector.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are foreign franchisors treated differently to domestic franchisors? Does national law\/regulation impose any debt\/equity restrictions?  Are there any restrictions on the capital structure of a company incorporated in your country with a foreign parent (thin capitalisation rules)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign equity ownership is restricted or limited as enumerated in the Foreign Investment Negative List (\u201cNegative List\u201d) issued pursuant to the Foreign Investment Act, as amended, which periodically covers investments areas\/activities which are open to foreign investors and\/or reserved to Filipino nationals. The maximum amount of equity that can be held by a foreign national in a corporation will therefore depend on the nature of business activity that it will engage in.<\/p>\n<p>If the franchisor is a branch office or a domestic corporation which will have foreign ownership that exceeds 40% of its outstanding capital stock, the minimum inward remittance or paid-up capital in said entity should be at least US$200,000.00 or its equivalent, provided that the line of business of the entity does not fall under any of the nationalized activities under the Negative List. Under the most recently issued list, the business of operating a franchise is not among the nationalized or partly-nationalized activities in the Philippines.<\/p>\n<p>With regard to restrictions on a company\u2019s capital structure for a domestic corporation with a foreign parent company, the Philippines currently does not have any general, codified thin capitalization rule. At present, companies rely on general tax-deductibility and transfer-pricing rules to regulate excessive related-party debt, except for large-scale metallic mining which is an exception under the new Enhanced Fiscal Regime for Large-Scale Metallic Mining Act (R.A. No. 12253).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement be governed by local law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Section 88.1 of the IP Code, it is mandatory for the agreement to provide that the laws of the Philippines shall govern the interpretation of the same and in the event of litigation, the venue shall be the proper court in the place where the licensee has its principal office. Otherwise, the franchise agreement will be deemed unenforceable in the Philippines. As stated in Item 4 above, this means that the franchise agreement is valid between the contracting parties but may not be brought to court in case of breach or invoked against third persons.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What dispute resolution procedures are available to franchisors and franchisees?  Are there any advantages to out of court procedures such as arbitration versus litigation, in particular if the franchise agreement is subject to a foreign governing law?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>At the outset, we clarify that the franchise agreement cannot be governed by foreign law. Section 88 of the IP Code expressly requires that the TTA, which includes franchise agreements, must be governed by Philippine law.<\/p>\n<p>Further, the IP Code requires that, in the event the agreement shall provide for arbitration, the Procedure of Arbitration of the Arbitration Law of the Philippines, the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) or the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC) shall apply, and the venue of arbitration shall be the Philippines or any neutral country (see Section 88).<\/p>\n<p>Should parties opt for the ICC Rules to govern, the ICC Rules as most recently amended will govern, which, presently, is the 2026 ICC Rules on Arbitration, absent a stipulation to the contrary.<\/p>\n<p>Resort to dispute resolution such as arbitration would be more advantageous due to its efficient procedure. Additionally, the parties are free to stipulate on the terms of the arbitration clause, such as the number of arbitrators and the language of the proceedings, as long they are consistent with the arbitration law agreed upon by the parties.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Must the franchise agreement and disclosure documents be in the local language?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The Philippines has two official languages: Filipino and English. There is no legal requirement in the Philippines for an agreement to be drafted in a certain language, but in practice, most commercial documents are in English. However, the document should be written or translated into English if it shall be submitted as evidence before the local courts (Rule 132, Section 33, Revised Rules of Evidence). Moreover, if an agreement which is not in English is to be submitted for recordal or registration with the IPOPHL, it must also be accompanied by an English translation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is it possible to sign the franchise agreement using an electronic signature (rather than a wet ink signature)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. While the E-Commerce Act recognizes the use of electronic signatures as valid, there is still no jurisprudence where the due execution or authenticity of a digitally-signed contract is in issue.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do you foresee any significant commercial or legal developments that might impact on franchise relationships over the next year or so?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Apart from the IPOPHL, another agency involved in the regulation of franchise and license agreements in the Philippines is the Philippine Competition Commission (\u201cPCC\u201d). At present, the review of franchise and license agreements are done by the IPOPHL, particularly the DITTB, including proposals on the transfer of their review from the IPOPHL to the PCC, but it has yet to be formalized into a bill. If codified into law, it would have an impact on franchise relationships since the transfer would entail compliance with a new set of stricter regulations that the PCC would enforce.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">7204<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/149942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/www.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=149942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}