President Rodrigo R. Duterte has signed an executive order (EO) directing the Department of Trade and Industry (DTI) to create a Franchise Registry for the protection of micro, small and medium enterprises (MSMEs).

EO 169, signed by Duterte on May 12, recognizes that the franchising industry plays a crucial role in sustaining the country’s economy by creating job opportunities, boosting consumption, and promoting tourism.

“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.

EO 169 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.

Under the EO, franchisors must be responsible for registering their franchise agreements with the DTI, provided that franchisors that are members of duly registered franchise associations must register with the DTI 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.

“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 read.

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,” it added.

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.

The DTI must formulate and issue implementing guidelines within 90 days from the effectivity of EO 169.

The necessary funding for the implementation of the order will be sourced from the regular appropriations of the DTI. Funding support for succeeding years must be incorporated in the annual General Appropriations Act, subject to the usual budget process.

According to the Philippine Statistics Authority (PSA) 2019 Update of the List of Establishments, 99.5 percent of businesses in the Philippines are MSMEs, 68 percent of which are into franchising.

An MSME refers to any business activity or enterprise which has a value falling between PHP50,000 to PHP20 million. (PNA)