Franchising in the Philippines: Reviewing Changes to the Operations Manual

The contract is not the only document to read before buying a franchise in the Philippines. The operations manual may set out day-to-day obligations—from opening hours to how payments are accepted. Consistent standards matter across a franchise network. But if the manual can be changed at any time, you need to understand how far those changes can affect your costs and liabilities.

1. Check whether the manual forms part of the contract

Look for a clause incorporating the manual, future versions and policies issued by letter or electronic notice into the agreement. The contract may be short, yet a clause like this can introduce extensive obligations.

Before signing, ask to see the current manual, or at least the sections that impose obligations on you as the franchisee. If it is confidential, you could suggest a confidentiality agreement or a supervised review with your lawyer. Do not assume there are no significant conditions simply because you have not yet been allowed to read it.

Make a note of the following:

• The date and version of the manual on which you are basing your decision.
• The documents treated as part of the agreement.
• How changes will be delivered and receipt confirmed.
• Which document takes precedence if the contract and manual conflict.

For example, if the contract specifies one operating schedule but the manual allows longer hours, who has the final say? It is safer to have a clear answer in the contract itself than to leave the issue unresolved until a dispute arises.

2. Distinguish operating standards from new financial obligations

Not all changes are alike. Clarifying a cleaning procedure is different from requiring a new system with a monthly fee. Changing a report format is different from requiring extra staff to cover longer opening hours.

Ask for the contract to distinguish routine procedural adjustments from changes with a significant cost impact. For the latter, propose a requirement for a written explanation, reasonable time to prepare and a clear statement of who will pay.

Prepare a cost schedule with your accountant. For each potential change, list one-off costs, recurring charges, additional working hours and any possible disruption to sales. This is not about predicting everything that might happen; it is a way to assess the extent of the powers the franchisor is seeking.

Also ask existing franchisees: What changes have they recently been required to make? How much notice did they receive? Could they request an extension? Use their answers to develop more specific questions, not as a substitute for written terms.

3. Understand the legal limits

The Philippines has no single comprehensive law covering every aspect of franchising. There are, however, specific rules: Executive Order No. 169 sets out protections relating to franchise agreements for micro, small and medium-sized enterprises. These should not be mistaken for a complete substitute for reviewing the contract and manual.

The Civil Code also matters. Under Article 1306, parties may agree terms provided they do not contravene the law, morals, good customs, public order or public policy. Under Article 1308, a contract must bind both parties; its validity or performance cannot be left solely to the will of one party.

This does not automatically invalidate every power to amend a manual. The precise wording, scope and exercise of that power need to be examined. Ask a lawyer to assess whether the clause provides a reasonable means of maintaining standards or gives one party excessive discretion.

If the agreement falls within the rules on technology transfer arrangements, the prohibited and mandatory clauses under Sections 87 and 88 of the Intellectual Property Code also matter. Placing a condition in the manual rather than the main contract does not put it beyond the reach of the law.

4. Agree the process before signing

Rather than asking for the manual never to change, propose a clear process. It should specify the reason for a change, its effective date, the preparation period and how to request clarification or an extension.

Urgent safety or legal compliance issues may require faster implementation. Even then, the franchisor should explain why the change is urgent and what support will be provided. For routine changes, ask whether there could first be a trial and an assessment of the impact on outlets.

Ask for a clause preventing the manual from introducing new fees or changing core rights established in the contract without a separate written agreement. This is a term you can propose, not an automatic right that applies to every franchise.

Practical takeaway: Before buying, establish not only what the current rules are, but also who can change them, how you will be notified and who will bear the consequences.