Franchising in the Philippines: Verify the Rights to the Brand

A business may have a familiar name, but that does not mean everyone using it is authorised to sell franchises. Before signing, make sure the party you are dealing with has clear authority to let you use the business name, logo and other elements of its identity. In the Philippine franchise market, this is an essential part of due diligence: problems with ownership or permission could affect your signage, operations and investment.

1. Distinguish business registration from trade mark registration

Registering a business name is not the same as registering a trade mark. A business name document from the Department of Trade and Industry (DTI), or a corporate registration document from the Securities and Exchange Commission (SEC), is no substitute for a trade mark registration certificate from the Intellectual Property Office of the Philippines (IPOPHL).

Under Republic Act No. 8293, or the Intellectual Property Code of the Philippines, trade mark rights are acquired through registration in accordance with the law. Certain names and well-known marks also receive specific protections, so your own searches alone will not be enough if a dispute arises.

Ask for the following:

• A copy of the registration certificate, including its number.
• The name of the registered trade mark owner.
• The goods or services covered by the registration.
• Evidence that the registration remains valid and that the requirements for maintaining it have been met.
• The exact version of the name and logo you will use.

If you are shown only an application, do not treat it as an approved registration. Ask what will happen to your business if the application is refused or someone opposes it.

2. Trace the chain of permission from the owner to you

It is not necessarily a problem if the trade mark owner and the company offering the franchise are different entities. There may be a valid licensing agreement. What matters is verifying an unbroken chain of permission from the owner through to your intended use.

If you are not dealing directly with the owner, ask for the document authorising the other party to grant franchises or sublicences. Check that it covers the Philippines, the type of business you plan to open and the full term you have been promised.

For example, if the seller’s remaining authorisation expires before the franchise agreement it is offering you, that gap needs explaining. A verbal assurance that “it is usually renewed” is not enough.

Also check that the person signing is authorised to represent the company. The names on the contract and business documents should match the official recipient of your payments. If they differ, ask for a written explanation and the relevant authorisation before proceeding.

3. Understand the applicable Philippine rules

It is incorrect to say that the Philippines has no specific franchise regulation. Executive Order No. 169, series of 2022, establishes protections for micro, small and medium-sized enterprises that are franchisees. These include minimum contractual provisions and registration of franchise agreements with the DTI, in accordance with the mechanisms established for that purpose.

Key requirements for agreements covered by the order include clear identification of the goods or services covered by intellectual property rights, the rights and obligations of both parties, and full disclosure of fees. Ask a lawyer to check whether the order applies to you and whether the relevant procedures have been followed.

Registering an agreement does not guarantee the validity of the trade mark or the success of the business. The Civil Code also applies to obligations, contracts and potential liability for misrepresentation. Rules governing public utility franchises are not the basis for an ordinary shop or restaurant franchise agreement.

4. Put responsibility for problems in writing

Do not settle for a clause that merely allows you to use the trade mark. The contract should clearly state who will take action and bear the costs if your right to use it is challenged.

Have the answers to these questions put in writing:

• Who will handle any complaint or legal proceedings relating to the trade mark?
• Who will cover reasonable defence costs?
• Who will pay if signage, packaging or branded equipment must be replaced?
• What remedy will be available if permission is lost during the term of your contract?
• What notice will you receive of any opposition, legal proceedings or change of ownership?

You are not automatically entitled to every remedy you would like; clear, enforceable provisions need to be agreed. Set aside a separate budget for legal review before committing substantial capital.

Practical takeaway: Do not buy a name alone. Verify the owner, trace the chain of permission and make sure your protections are in writing in case the right to use the brand is lost.