DTI FRANCHISING RULING
To avoid more people being scammed by fake Franchisors selling their franchises (particular cart
Franchises), the DTI came out with a Bureau Order (10-24 Series of 2010) to assist Franchise Buyers
not being victimized by unscrupulous franchise sellers.
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 engaged or interested in the franchise business.
2. 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 Mechanism for dispute resolution
3.2 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 Franchise Consultant
4. 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
