DTI FRANCHISING RULING

Bureau Order No. 10-24

Series of 2010
Subject: Advisory on Due Diligence to be Undertaken by
a Prospective Franchisee
In order to protect the interest and welfare of a
prospective
franchisee,
the
DTI-Bureau
of
Trade
Regulation and Consumer Protection (BTRCP) has issued
the following Advisory:
1.

Scope and Coverage

This advisory is addressed to persons

interested in the franchise business.
2.

engaged

or

Definition of Terms

2.1
Franchise Agreement is a written contract or
agreement between two or more parties by which a
Franchisor grants the Franchisee the 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.

2.2
Franchisor is a person, individual or a
Corporation, duly registered with the Department of
Trade and Industry (DTI) or the Security Exchange
Commission (SEC).
2.3
Franchisee is a person, individual or a
Corporation duly registered with the Department of
Trade and Industry (DTI) or the Security Exchange
Commission (SEC)
2.4
Franchise Disclosure Information refers to a
set of information and documents that needs to be
disclosed by the Franchisor to the Franchisee and / or
prospective Franchisee.
3.
Due Diligence to be undertaken by a prospective
Franchisee
Before a person decides to engage in or acquires a
franchise business, due diligence should be done by the
prospective franchisee.
3.1
Secure or ask Disclosure Information for the
Franchisor as follows:
3.1.1
Business address, email address, internet home
page / website, fax numbers and other contact details
3.1.2

Copy of DTI or SEC Registration

3.1.3
Parent companies and affiliates, if any, and
their
respective
roles
in
the
Franchise,
and
Franchisors declaration if any affiliate is a supplier
and what they will supply

3.1.4
Names of the Board of Directors and officers
with a brief description of their qualifications and
background, ownership of interests and references
3.1.5
The contact number and business location of
existing Franchisees
3.1.6

Executed promotional / marketing materials

3.1.7
Description of the business concept, which
includes brand image, brand personality, unique selling
proposition, target market, mission and vision, among
others
3.1.8
Basic information on training, commercial and /
or technical assistance
3.1.9
Certificate that the Franchisor is a member in
good standing of any Franchisor Association and that
the Franchisor has not pending administrative, civil or
criminal case

3.1.10
Declaration of the Initial Fee, amount that
will be collected and services covering these fees
3.1.11
Training that will be provided, number of
persons, how long and training modules

3.1.12
Number of years Company has operated and
number of years it has franchised with corresponding
numbers of company owned branches and franchised
outlets
3.1.13

Draft of Franchise Agreement

3.1.14
Full disclosure of the Financial requirements
of the franchise business
3.1.15
A provision that requires the franchise
applicant to seek adequate legal and financial counsel
before signing the Franchise agreement
3.1.16
3.2

Mechanism for dispute resolution

Call or visit or consult any of the following:

3.2.1
Franchisor Association (FIFA Filipino
International Franchise Association 995.0734)
3.2.2

Nearest DTI Regional or Provincial Offices

3.2.3

Securities and Exchange Commission

3.2.4

DTI Direct (Telephone Number 751-3330)

3.2.5

Certified Franchise Executive

3.2.6

4.

Franchise Consultant

Franchisor Association or Organization

To establish a databank of Franchisor association or

organization nationwide, Franchisor association or
organization should submit to DTI-Bureau of Trade
Regulation
and
Consumer
Protection
(BTRCP)
the
following documents:
4.1
A certified true copy of its Article of
Incorporation and By-Laws
4.2
A current certified true copy of Certificate of
Good Standing from the SEC
4.3
Updated list of trustees, officers and members of
the organization including their addresses and
4.4
Other pertinent documents such as Code of Ethics
and Standards.
5.

Self-Policing of Members

This Advisory aims to promote and encourage the

Franchise industry to self-police its own ranks by
setting a Code of Ethics and Standards for grievance or
dispute resolution mechanism to redress complaints
against its members, including issues arising from
transactions with their franchisees, prospective or
otherwise.

6.

Publication

This advisory shall be published in newspapers of

general circulation and shall be part of the DTI
Information, Educational and Communication Program.
Issued this 17th day of November 2010 in Makati City
VICTORIO MARIO A. DIMAGIBA
Director