Franchise Agreement (Philippines)
FRANCHISE AGREEMENT
Civil Code of the Philippines (RA 386) | Intellectual Property Code (RA 8293) | Revised Corporation Code (RA 11232)
This Franchise Agreement ("Agreement") is entered into as of [Effective Date]
BETWEEN:
(1) [Franchisor Name], with principal office at [Franchisor Address], registered under [Franchisor Registration Number] ("Franchisor"); AND
(2) [Franchisee Name], with address at [Franchisee Address], registered under [Franchisee Registration Number] ("Franchisee").
The Franchisor and Franchisee are collectively referred to as "the Parties."
RECITALS
A. The Franchisor owns and operates the [Brand Name] franchise system, including all associated trademarks, trade names, service marks, and proprietary business methods (IPOPHL Registration No(s). [Trademark Numbers]).
B. The Franchisee desires to operate a [Brand Name] franchise at [Franchise Location], and the Franchisor desires to grant such right subject to the terms and conditions herein.
1. GRANT OF FRANCHISE
1.1 The Franchisor hereby grants to the Franchisee a [Exclusivity] license to operate one (1) [Brand Name] franchise outlet at [Franchise Location] ("Franchised Location") for a term of [Franchise Term] years commencing on [Commencement Date] and expiring on [Expiry Date] ("Franchise Term"), subject to the terms of this Agreement.
1.2 The Franchisee accepts the franchise and agrees to operate the franchised business strictly in accordance with the Franchisor's operations manual, quality standards, and any written directives issued from time to time.
2. FEES AND PAYMENTS
2.1 Initial Franchise Fee: The Franchisee shall pay the Franchisor an initial franchise fee of [Initial Franchise Fee] (exclusive of VAT at 12%) upon execution of this Agreement. This fee is non-refundable.
2.2 Royalty: The Franchisee shall pay a royalty of [Royalty Rate] of gross sales, payable [Payment Schedule]. Royalties are subject to final withholding tax under the National Internal Revenue Code (NIRC), Section 27(D)(1).
2.3 Marketing Fund: The Franchisee shall contribute [Marketing Fund Rate] of gross sales to the Franchisor's national marketing fund, payable on the same schedule as royalties.
2.4 All payments shall be made to the Franchisor's designated bank account. Late payments shall bear interest at 12% per annum under Bangko Sentral ng Pilipinas (BSP) regulations.
3. INTELLECTUAL PROPERTY LICENSE
3.1 The Franchisor grants the Franchisee a non-exclusive, non-transferable license to use the [Brand Name] trademarks (IPOPHL Registration No(s). [Trademark Numbers]) and associated trade dress solely in connection with the operation of the Franchised Location during the Franchise Term.
3.2 The Franchisee acknowledges that all intellectual property rights in the [Brand Name] system remain exclusively vested in the Franchisor, and the Franchisee acquires no ownership interest therein.
3.3 The Franchisee shall promptly notify the Franchisor of any infringement or unauthorized use of the Franchisor's intellectual property and shall cooperate in any enforcement action under the Intellectual Property Code (RA 8293).
4. TRAINING AND SUPPORT
4.1 The Franchisor shall provide initial training to the Franchisee and its designated staff for [Training Days] days at [Training Location] prior to the opening of the Franchised Location.
4.2 The Franchisor shall provide ongoing operational support, periodic updates to the operations manual, and access to the Franchisor's supplier network during the Franchise Term.
5. FRANCHISEE OBLIGATIONS
5.1 The Franchisee shall operate the Franchised Location in strict compliance with the Franchisor's operating standards, product specifications, and service procedures as set out in the Operations Manual.
5.2 The Franchisee shall obtain and maintain all required government permits and licenses, including the BIR Certificate of Registration (Form 2303), Mayor's Permit, Barangay Business Clearance, and all permits required under the Local Government Code (RA 7160).
5.3 The Franchisee shall comply with the Labor Code (PD 442) and DOLE regulations with respect to all employees, including registration with SSS, PhilHealth, and Pag-IBIG/HDMF.
5.4 The Franchisee shall issue official receipts in compliance with BIR regulations under the NIRC and maintain books of accounts subject to BIR audit.
6. TERMINATION
6.1 Either party may terminate this Agreement without cause upon [Notice Period] days' prior written notice to the other party.
6.2 The Franchisor may terminate this Agreement immediately upon written notice if the Franchisee fails to pay fees, materially violates operating standards, becomes insolvent, or engages in conduct injurious to the [Brand Name] brand.
6.3 Upon termination or expiry, the Franchisee shall immediately cease use of all [Brand Name] trademarks, trade dress, and proprietary materials, and return the Operations Manual and all confidential documents to the Franchisor.
6.4 Post-Termination Non-Compete: For a period of [Non-Compete Period] years following termination or expiry, the Franchisee shall not directly or indirectly operate or invest in a business substantially similar to the franchised business within the territory.
7. GOVERNING LAW AND DISPUTE RESOLUTION
7.1 This Agreement shall be governed by and construed in accordance with the laws of the Republic of the Philippines, including the Civil Code (RA 386) and the Intellectual Property Code (RA 8293).
7.2 Disputes arising out of or relating to this Agreement shall be resolved by [Dispute Resolution], with venue in [Venue], Philippines.
7.3 Before initiating formal proceedings, the Parties shall attempt to resolve disputes through good-faith negotiation for a period of thirty (30) days.
8. GENERAL PROVISIONS
8.1 Entire Agreement: This Agreement constitutes the entire agreement between the Parties regarding the franchise and supersedes all prior negotiations, representations, and understandings.
8.2 Amendment: No amendment to this Agreement shall be binding unless in writing and signed by authorized representatives of both Parties.
8.3 Severability: If any provision of this Agreement is found invalid or unenforceable under Philippine law, the remaining provisions shall continue in full force and effect.
8.4 This Agreement shall be notarized before a Philippine notary public in compliance with the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC).
Franchisor
________________
Signature
Franchisee
________________
Signature
What Is a Franchise Agreement (Philippines)?
A Franchise Agreement in the Philippines governs the arrangement between the parties and the conditions on which it operates.
Philippine franchise law does not have a standalone Franchise Act; instead, franchise relationships are governed primarily by Civil Code Articles 1305 to 1422 on contracts, the Intellectual Property Code (RA 8293, 1997) for trademark and trade secret protections, and the Revised Corporation Code (RA 11232, 2019) where corporate entities are involved. The Department of Trade and Industry (DTI) and the Philippine Franchise Association (PFA) provide industry guidance and a voluntary franchise disclosure framework modelled on international standards.
The Bureau of Internal Revenue (BIR) treats franchise fees as ordinary income subject to income tax and, where applicable, value-added tax (VAT) at 12% under the National Internal Revenue Code (NIRC, RA 8424 as amended by TRAIN Law, RA 10963). Royalty payments are subject to a 20% final withholding tax under NIRC Section 27(D)(1) for domestic corporations or 25% for non-resident foreign corporations, unless reduced by a tax treaty.
A Franchise Agreement in the Philippines differs from a distributorship or dealership agreement in that a franchise involves the franchisee operating under the franchisor's brand identity and standardized system, whereas a distributor purchases goods for resale under its own brand. Philippine courts, including the Court of Appeals in cases involving franchise termination disputes, apply contract law principles requiring good faith performance under Civil Code Article 1159 and Article 19 on abuse of rights.
The legal framework governing the Franchise Agreement (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Franchise Agreement (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.
When Do You Need a Franchise Agreement (Philippines)?
A Franchise Agreement in the Philippines is required whenever a business owner grants another party the right to use a brand, trade name, operating system, or proprietary method in exchange for fees.
A Franchise Agreement is needed when a Philippine corporation or individual franchisor seeks to expand a food and beverage, retail, or service business by licensing the brand to franchisees nationwide, as permitted under the Revised Corporation Code (RA 11232) and Civil Code Article 1305.
A Franchise Agreement is required when a foreign franchisor enters the Philippine market through a master franchise or area development arrangement, because the foreign brand's trademarks registered with the Intellectual Property Office of the Philippines (IPOPHL) can only be licensed to the Philippine franchisee through a formal agreement recorded with IPOPHL under the Intellectual Property Code (RA 8293, Section 150).
A Franchise Agreement is needed when establishing territory exclusivity provisions, because without written terms, a franchisee has no legal recourse under Philippine law if the franchisor appoints competing franchisees in the same area.
A Franchise Agreement is required to define the franchisee's right to use the franchisor's trade secrets and confidential business information, which are protected under RA 8293, Section 172.2 and the Civil Code's provisions on breach of confidence, but only if a binding written agreement establishes the confidentiality obligation.
A Franchise Agreement is needed when structuring the renewal, transfer, and termination terms, because under Civil Code Article 1191, a party injured by a breach may rescind the contract, but the grounds and procedures for termination must be clearly defined to avoid disputes before the Regional Trial Court or through arbitration under the Alternative Dispute Resolution Act (RA 9285, 2004).
Parties in Philippines should prepare a Franchise Agreement (Philippines) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Franchise Agreement (Philippines)
A valid and enforceable Franchise Agreement in the Philippines must contain the following essential components.
Parties and Grant of Franchise: Full legal names, business registration numbers (SEC Registration Number or DTI Business Name Certificate number), and principal office addresses of the franchisor and franchisee. The grant clause must clearly describe the rights conveyed — use of trade name, trademark, operating system, and proprietary materials — along with the territory covered and whether exclusivity is granted.
Franchise Fees and Royalties: The initial franchise fee (typically PHP 200,000 to PHP 5,000,000 depending on brand), ongoing royalty rate (commonly 3%–8% of gross sales), and marketing fund contribution (typically 1%–3% of gross sales). BIR withholding tax obligations under NIRC Section 27(D)(1) must be acknowledged, as royalties are subject to final withholding tax.
Term and Renewal: The franchise term (commonly 5 or 10 years in the Philippines), renewal conditions, and any renewal fee. Civil Code Article 1306 permits parties to establish the stipulations they deem convenient, so clear renewal terms protect both parties.
Training and Support Obligations: The franchisor's obligation to provide initial training, pre-opening support, and ongoing operational assistance. Failure to provide agreed support may constitute a breach actionable under Civil Code Article 1170.
Operating Standards and Quality Control: Requirements for operating hours, product/service standards, supplier mandates, uniforms, and signage. These provisions connect to the franchisor's right to inspect franchised premises at reasonable times.
Intellectual Property Provisions: A license of the franchisor's trademarks registered with IPOPHL, with acknowledgement that the franchisee acquires no ownership interest. The agreement should reference IPOPHL trademark registration numbers and require the franchisee to assist in protecting the marks from infringement.
Confidentiality and Non-Competition: Post-termination non-compete restrictions are enforceable under Philippine law if reasonable in scope, territory, and duration — the Supreme Court in Del Monte Philippines Inc. v. Salazar upheld reasonable restrictive covenants where supported by legitimate business interest.
Termination Provisions: Grounds for termination with or without cause, notice periods, and post-termination obligations including cessation of use of the franchisor's IP, return of manuals, and settlement of outstanding fees.
Governing Law and Dispute Resolution: Designation of Philippine law as governing law and the venue — typically the Regional Trial Court of Metro Manila or CIAC for construction-related franchise fitouts — or arbitration under RA 9285 and the Special ADR Rules (A.M. No. 07-11-08-SC).
Signatures and Notarization: Execution by authorized representatives and notarization before a commissioned Philippine notary public under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC). Notarization converts the agreement into a public document with evidentiary weight under the Rules of Court, Rule 132, Section 23. The forms-legal.com Franchise Agreement (Philippines) template covers the mandatory elements under Revised Corporation Code (RA 11232, 2019).
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Franchise Agreement (Philippines) (Philippines) [Legal document template]. Forms Legal. https://forms-legal.com/philippines/business/partnerships/franchise-agreement-philippines
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title = {Franchise Agreement (Philippines) (Philippines)},
year = {2026},
howpublished = {\url{https://forms-legal.com/philippines/business/partnerships/franchise-agreement-philippines}},
note = {Free legal document template. Based on Revised Corporation Code (RA 11232, 2019)}
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Frequently Asked Questions
A Franchise Agreement is legally binding in the Philippines under Civil Code Articles 1305 to 1422 governing contracts, provided it satisfies the essential requisites of a valid contract: consent of the contracting parties, an object certain which is the subject matter, and a cause or consideration. Philippine courts treat franchise agreements as commercial contracts and enforce their terms as written, applying the principle of autonomy of contracts under Civil Code Article 1306. Notarization before a Philippine notary public under the 2004 Rules on Notarial Practice (A.M. No. 02-8-13-SC) is not strictly required for validity but converts the document into a public instrument under Rule 132 of the Rules of Court, strengthening its evidentiary weight. Disputes over franchise agreements are typically heard by the Regional Trial Court or resolved through voluntary arbitration under the Alternative Dispute Resolution Act (RA 9285, 2004).
The Philippines does not have a standalone Franchise Act or mandatory pre-sale franchise disclosure law equivalent to the US FTC Franchise Rule or Australian Franchising Code of Conduct. Franchise relationships are governed by the Civil Code (RA 386), the Intellectual Property Code (RA 8293), and general contract law principles. The Philippine Franchise Association (PFA) promotes voluntary adoption of a Franchise Disclosure Document (FDD) following international best practices, and the Department of Trade and Industry (DTI) provides franchise development programs. Some franchise disputes involving misrepresentation may be addressed under the Consumer Act (RA 7394) or the Civil Code's provisions on fraud and mistake in Article 1338. Under Philippines law, Revised Corporation Code (RA 11232, 2019), parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.
Franchise fees received by a Philippine resident franchisor are treated as ordinary income subject to corporate income tax (25% for domestic corporations under NIRC Section 27(A) as amended by CREATE Act, RA 11534) or personal income tax for individual franchisors. Royalties paid to a domestic corporation are subject to a 20% final withholding tax under NIRC Section 27(D)(1); royalties paid to a non-resident foreign corporation are subject to 25% final withholding tax under NIRC Section 28(B)(1), unless reduced by an applicable tax treaty. Value-added tax (VAT) at 12% under NIRC Section 108 applies to franchise fees and royalties where the franchisor is a VAT-registered person. The franchisee must withhold the applicable tax and remit it to the Bureau of Internal Revenue (BIR) using BIR Form 1601-FQ for final withholding taxes.
A Franchise Agreement in the Philippines can be terminated early under grounds specified in the agreement itself or under general contract law principles. Civil Code Article 1191 grants the injured party the right to rescind a contract upon a substantial breach by the other party. Typical grounds for early termination include the franchisee's failure to pay fees, violation of operating standards, unauthorized use of intellectual property, or bankruptcy. The franchisor must generally provide written notice and a cure period before terminating for non-material breaches, as Philippine courts apply the principle of good faith under Civil Code Article 1159. Termination without just cause or without following contractual procedures may expose the terminating party to damages claims under Civil Code Articles 2201 to 2235, including actual, moral, and exemplary damages.
A Franchise Agreement in the Philippines does not require registration with a specific franchise registry, as the country lacks a dedicated franchise registration law. However, if the agreement involves a license of trademarks registered with the Intellectual Property Office of the Philippines (IPOPHL), the trademark license should be recorded with IPOPHL under the Intellectual Property Code (RA 8293, Section 150) to be binding on third parties and to allow the licensee to join infringement proceedings. Where the franchise involves technology transfer, the Technology Transfer Agreement may require IPOPHL review under RA 8293, Sections 88 to 92, to ensure compliance with prohibited clauses. Foreign franchisors establishing a presence in the Philippines through a Philippine franchisee should also ensure the Philippine entity is registered with the Securities and Exchange Commission (SEC) under the Revised Corporation Code (RA 11232) and obtains BIR and local government permits.
A Philippine Franchise Agreement can be transferred or assigned by the franchisee only with the prior written consent of the franchisor, as stipulated in the agreement. Civil Code Article 1311 provides that contracts take effect only between the parties, their assigns, and heirs, but assignment of rights requires consent of the obligor (the franchisor) where the obligation is personal in nature. Most franchise agreements in the Philippines contain anti-assignment clauses requiring franchisor approval of any transfer, change of ownership, or sublicensing of the franchise. The franchisor may condition approval on the proposed transferee meeting qualification standards, completing training, and paying a transfer fee. Unauthorized assignment may constitute a material breach entitling the franchisor to terminate the agreement under Civil Code Article 1191.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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