Dave Christian C.

Umeran 13/02/2020
Block 1D
Explaining a Franchise
Have you ever heard of businesses like ABS-CBN, Meralco, Manila Water and PLDT?
Do you know what is common among these businesses? If not, you should know that these are
enterprises whose existence is owed to a grant called a franchise. Now what is a franchise? In its
simplest term, a "franchise" is a special privilege created by law. This privilege cover services
such as electricity distribution, water rights, mining, transportation, telecommunications, public
broadcasting, and other public services and utilities. In other words, if a business hopes to
operate in the services mentioned, they are required to secure a franchise. A franchise depending
on the nature of the service a business will do can be secured in two ways. Either it be secured by
a law drafted by Congress and signed by the President, or through authorities and agencies who
are by law delegated with the power to approve a franchise. Once a franchise is approved, a
business can operate in a public utility or service.

However, a franchise is not simply granted to anyone who wishes to acquire it. There are
limitations set forth by our constitution as to who gets a franchise, how long will it last, and how
many can acquire it. First, our constitution specifies that a franchise can only be granted to a
Filipino citizen or a corporation where at least 60% of stocks are owned by Filipinos. The
exclusivity of franchises is to ensure that only Filipinos can enjoy the fruits of these vital
industries. Second, a grant of franchise cannot last forever. At most, a franchise can remain
effective for 50 years subject to renewal. Lastly, a grant of franchise cannot be exclusively given
to a single individual or entity. According to the framers of our constitution, to grant a special
privilege as exclusive is contrary to the nature of public utilities and service. If public utilities
and services are monopolized, the risk of unethical business practices arises which are
detrimental to the public. Having multiple operators in a utility or service minimize this risk by
having a competitive environment where players have to provide good services to retain clients.
With these said, this is how franchises generally work.