Franchising in the Philippines: Protection Against Opening Delays

You may have paid for your franchise, yet still be waiting for equipment or for the shop’s systems to become operational. Meanwhile, wages, interest and other costs may already be mounting. Before buying a franchise in the Philippines, it is important to establish who is responsible for each step towards opening—and what happens if the agreed timetable is not met.

1. Make the promised opening date measurable

A statement such as “ready within a few weeks” is inadequate without a clear starting date and conditions. Does the period run from signing, full payment, site approval or handover of the premises for fitting out? An expected date is not the same as a binding deadline written into the contract.

Ask for an attached schedule setting out:

• Task: for example, delivering and installing equipment or getting the point-of-sale system operational.
• Responsible party: the franchisor, franchisee or an independent contractor.
• Deadline: including any prerequisites that must be completed before work can begin.
• Evidence of completion: a test report, equipment inventory or signed acceptance document.
• Change procedure: who may request an extension and how it will be approved.

If another company will deliver or install the equipment, establish who holds the contract with that company. The franchisor is not automatically liable for every delay caused by an independent contractor you have engaged. The boundaries of each party’s responsibilities should be clear.

2. Link payments to actual completion

Check when each part of your investment becomes payable. If almost everything must be paid before essential equipment is delivered, more of your money is at risk while you are still unable to trade.

You could propose milestone payments linked to plan approval, delivery, installation and successful testing. This is not an automatic entitlement in every franchise arrangement; it must be agreed and put in writing. If the other party refuses, factor that risk into your comparison of franchise brands.

Also clarify what “delivered” and “ready for use” mean. A machine may be on the premises but not installed, missing essential parts or failing its tests. Do not sign an acceptance document stating that everything is complete if anything is outstanding.

Prepare a snagging list with photographs, dates, the person responsible and a deadline for putting each issue right. Specify which issues prevent opening and which can be resolved while the shop is trading.

Check when the franchise term and recurring charges begin, too. If they start upon signing, a delay beyond your control could reduce the time available to earn a return. Ask for clarity on whether dates or charges can be adjusted in these circumstances.

3. Set out the response to delays, not just their causes

A broad statement that “the schedule may change” is not enough. There should be a process for dealing with an identified obstacle: prompt written notice, an explanation, a revised timetable and steps to minimise the impact.

Distinguish between delays caused by the franchisee, those caused by the franchisor and events beyond either party’s reasonable control. Have the force majeure clause reviewed. Supplier delays or staff shortages do not automatically remove liability.

Possible protections to negotiate include:

• A period in which to remedy an unfulfilled obligation.
• Temporary suspension of agreed charges while opening remains impossible.
• Refunds for goods or services that have not been delivered.
• A final deadline giving you a clear choice about whether to proceed.

Specify the documents needed to substantiate costs or delays. Do not assume that all lost sales can automatically be recovered. Any claim will depend on the law, the contract, causation and the evidence.

4. Have the agreement reviewed under Philippine law

There is no single comprehensive law covering every aspect of franchising in the Philippines. There are, however, specific rules: Executive Order No. 169, series of 2022, requires agreements between franchisors and micro, small and medium-sized enterprise franchisees in the Philippines to be in writing, notarised and to include prescribed minimum terms.

The Civil Code is also important. Under Article 1306, parties may agree terms provided they do not conflict with the law, morals, good customs, public order or public policy. Its rules on obligations, delay and breach of contract are relevant when assessing liability.

Ask a lawyer to check whether a formal demand for performance is required and how it should be served. Do not simply stop paying or cancel without a review of the contract and applicable law.

Practical takeaway: Before signing, make sure the timetable, payments, acceptance criteria and remedies for delay are consistent with one another. Clear obligations offer stronger protection than a promise that you will be “opening soon”.