WHEREAS, the franchising industry plays a crucial role in sustaining the country's economy by creating job opportunities, boosting consumption, and promoting tourism; and

NOW, THEREFORE, I, RODRIGO ROA DUTERTE, President of the Philippines, by virtue of the powers vested in me by the Constitution and existing laws, do hereby order:

Section 1. Definition of Terms. For purposes of this Order, the following terms are hereby defined as follows:

a. "Franchise" means a contract or agreement between a franchisor and a franchisee where: (i) the franchisor grants to the franchisee the right to operate a business according to the franchise system and during a term as determined by the franchisor; (ii) the franchisor grants the franchisee the right to use a mark, or a trade secret, or any confidential information or intellectual property owned by the franchisor or relating to the franchisor; (iii) the franchisor possesses the right to control the administration over the franchisee's business operation during the franchise in accordance with the franchise system; and (iv) in return for the grant of the above rights, the franchisee is required to pay a fee or other form of consideration;

b. "Franchise agreement" means a written contract or agreement between a franchisor and franchisee by which the former grants the latter the right to engage in the business of offering, selling, or distributing goods or services under a marketing system, technology transfer arrangements included, 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;

c. "Franchisee" means a sole proprietorship, partnership, cooperative or corporation duly registered with, as applicable, the DTI, the Securities and Exchange Commission (SEC), or the Cooperative Development Authority (CDA);

d. "Franchisor" means a sole proprietorship, partnership, cooperative or corporation duly registered with the DTI, SEC or CDA;

e. "MSME," in accordance with RA No. 6977, as amended, means micro, small and medium enterprises or any business activity or enterprise engaged in industry, agri-business and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, must have value falling under the following categories:

i. micro: less than P50,000.00;
ii. cottage: P50,001.00 - P500,000.00;
iii; small: P500,001.00 - P5,000,000.00; and
iv. medium: P5,000,001.00 - P20,000,000.00

f. "Person" means a natural person, or a juridical entity such as a corporation, joint stock company, partnership, cooperative, association, firm, joint venture, or trust registered with proper government agency.

Section 2. Prescribing the Minimum Terms and Conditions of Franchise Agreements. All franchise agreements entered into by and between a franchisor and an MSME franchisee within the Philippines shall be in writing, duly notarized, and shall include the following minimum terms and conditions:

a. Name and description of the products or services under the franchise;
b. Specific rights granted to the MSME franchisee, such as but not limited to the right to use the mark or any other intellectual property rights duly registered with the Intellectual Property Office of the Philippines (IPOPHIL);
c. Full disclosure of any pre-signing, initial or recurring fees, such as but not limited to, franchise fee, promotion fee, royalty fee or any related type of fee which may be imposed on the MSME franchise;
d. Detailed responsibilities of the franchisor, which shall include the enumeration of the types and particulars of assistance and the submission of the franchise agreement to the DTI;
e. Detailed responsibilities of the MSME franchisee;
f. Non-discrimination provisions;
g. Duration of the franchise and the terms and conditions for renewal;
h. Effects of and ground for pre-termination, termination or expiration of the franchise agreement;
i. Provision on "cooling off" period where the MSME is given the option to terminate the agreement;
j. Mechanism for dispute resolution which shall include a stipulation that parties may seek voluntary mediation under RA No. 9285 or the "Alternative Dispute Resolution Act of 2004"; and
k. Remedies of the parties in case of any violation of the terms and conditions of the franchise agreement.

For non-MSME franchisees, franchisors may consider the minimum terms and conditions provided herein as best practice, and incorporate the same in their respective franchise agreements.

Section 10. Effectivity. This Order shall take effect immediately after its publication in the Official Gazette or a newspaper of general circulation.

DONE, in the City of Manila, this 12^th day of May, in the year of Our Lord, Two Thousand and Twenty Two.