Franchising in the Philippines: Can You Sell Online?

Buying a franchise does not automatically give you the right to sell online. The brand may have its own app, only selected branches may handle delivery orders, or you may need approval before joining a platform. When considering a franchise in the Philippines, clarify these rules before paying: the outlet you expect to earn revenue from both in-store and online sales may turn out to be restricted to just one channel.

1. Establish which sales channels are permitted

An answer such as “yes, you can sell online” is not enough. Taking orders through your own page, selling on an online marketplace, joining a delivery app and fulfilling orders placed through the brand’s official website are different arrangements.

Ask for a clear breakdown of the rules for each channel:

• Can you create a dedicated page for your branch and accept payments through it?
• Can you join a delivery platform under your own agreement?
• Must all orders go through the brand’s central system?
• Which products can be delivered, and which are available only in-store?
• Who grants approval, and how long does the review take?

Distinguish permission to advertise from permission to sell. Having a branch page does not necessarily mean you can accept orders or collect payments. If online sales are important to your business plan, do not include them in your revenue projections until the scope of your permission is clear.

2. Trace the order, the payment and the responsibilities

Ask for an explanation of the full order process, from the customer choosing a product to the money reaching your account. Your branch may prepare the product while head office collects the payment. In that arrangement, you need to understand how your share is recorded and transferred.

Use the following scenarios in your discussions:

A standard order. Who receives it, who issues the sales documentation, and when does the branch receive payment?

A cancelled order. If the product has already been prepared when the customer cancels, who covers the wasted ingredients and packaging?

A delivery error. If the order was prepared correctly but the courier makes a mistake, is the refund automatically deducted from the branch’s proceeds?

A temporary pause. Can you stop accepting orders when you are short-staffed, out of stock or dealing with broken equipment?

Ask for a sample payment reconciliation and settlement report with sensitive information redacted. It should show which orders were completed, what deductions were made and how errors are corrected. A total deposited into your bank account is not enough if you cannot trace how it was calculated.

3. Calculate what remains from each order

Extra sales do not always mean extra profit. Calculate the costs of online orders separately rather than simply using your usual in-store sales costs.

Start with the amount the branch will actually receive. Deduct the cost of products or ingredients, special packaging, platform fees, payment processing and any discounts you fund. Include applicable franchise fees and additional labour costs too.

Ask whether participation in discount offers or free-delivery promotions is compulsory. Establish who funds them and whether there is a limit on deductions from your sales revenue. Do not assume that the brand pays for a promotion simply because it runs it.

Test your calculations on a standard order, a small order and a discounted order. Then assess the gap between buying stock and receiving payment. An order may be profitable on paper, but you may still need to fund several days of operations before the money is transferred.

4. Have the legal basis for restrictions reviewed

The Philippines has no single comprehensive law covering every aspect of franchising. Executive Order No. 169, s. 2022 aims to protect micro, small and medium-sized enterprises in the franchise sector. General contract law, intellectual property law and competition law also apply.

Under Article 1306 of the Civil Code, parties may agree contractual terms, but those terms must not be contrary to law, morals, good customs, public order or public policy. A ban on a particular online sales channel is therefore not automatically unlawful.

However, Republic Act No. 8293, or the Intellectual Property Code, is also relevant. For agreements involving the transfer of technology and know-how, Sections 87 and 88 set out prohibited and mandatory provisions. Republic Act No. 10667, the Philippine Competition Act, may also apply if a restriction has a substantial adverse effect on competition. Have a lawyer review the specific clause; do not simply assume that every restriction is either valid or unenforceable.

Practical takeaway: Before buying, confirm three things: where you can sell, how you will receive payment and how much will remain after all deductions.