Franchising in the Philippines: Who Is Responsible for Permits?

Your location may have the brand’s approval without being legally ready to open. Before buying a franchise, clarify who will obtain the permits, cover the costs and bear the consequences of delays. In franchising, it is important to distinguish permission to use a brand from government authorisation to operate the business itself.

1. Distinguish the agreement from government authorisation

A typical business franchise is an agreement between the owner of a business system and brand and the entrepreneur who will use them. It does not automatically provide the registrations, licences or permits required for an outlet.

This differs from a franchise to operate a public utility, as referred to in Article XII, Section 11 of the Philippine Constitution. The ownership and authorisation-period conditions set out there are not general rules for every shop operating under a brand.

The Philippines has no single comprehensive law covering every aspect of business franchising. Important legal foundations include the Civil Code, which governs obligations and contracts, and Republic Act No. 8293, or the Intellectual Property Code, which covers brand rights and licensing. Executive Order No. 169, series of 2022, also sets out protections and requirements for micro, small and medium-sized enterprises under agreements within its scope.

These do not replace separate obligations to comply with tax, safety, sanitation and local government rules. Nor does membership of a franchise association amount to a permit.

2. Draw up a checklist for the specific location

Do not rely solely on the brand owner’s general checklist. Ask the permitting office in the city or municipality where the outlet will be located. Requirements vary according to the business activity, building, equipment and location.

The following usually need to be checked:

• Business registration: the appropriate registration for the ownership structure, including registration with the Bureau of Internal Revenue (BIR).
• Local authorisation: a business permit and related requirements imposed by the barangay, the smallest local government unit, and other local authorities.
• Use of the premises: whether the proposed activity is permitted at the location and whether the building documentation is appropriate.
• Safety and sanitation: fire, health and sanitation requirements relevant to the operation.
• Special licences: additional authorisation for activities overseen by a particular government regulator.

For example, do not assume that a shop selling only packaged products has the same requirements as an outlet that cooks or manufactures on site. Obtain the official checklist and have the actual operating plan reviewed.

Record each document, the issuing agency, the applicant, the cost, the timeframe and the renewal date. Keep official fees separate from charges for handling applications.

3. Put responsibilities and costs in writing

A promise that “permit assistance is included” is vague. It may mean nothing more than providing a checklist, rather than preparing and submitting applications.

Before signing, have the precise division of responsibilities set out in the agreement or an attached schedule. Who will prepare the plans? Who will obtain documents from the building owner? Who will attend inspections and pay to remedy any shortcomings?

Also clarify whose name will appear on each document. These must match the appropriate legal entity and the actual operation; a permit held by another outlet of the same brand is not enough.

If there is a charge for handling applications, ask whether it covers resubmissions, additional inspections and changes to plans. Request receipts for official fees and a separate breakdown of service charges.

Remember: allocating responsibilities in a contract does not automatically remove liability to the authorities. The business operator may remain responsible even after delegating the application process to someone else.

4. Agree what happens if approval is not granted

Before committing substantial capital, discuss the possibility of an application being delayed or refused. Ask a lawyer whether proceeding with the arrangement can be made conditional on obtaining essential authorisations.

It should be clear when the franchise term begins and when recurring charges start. If the outlet cannot yet open, is there a grace period? Who pays if a design required by the brand must be changed to pass inspection?

Ask for a written procedure covering an unsuitable location: options might include moving to another site, setting a final deadline for approval or agreeing to refund specified fees. These are terms to negotiate, not automatic rights under every agreement.

Practical takeaway: Before buying, prepare a permit checklist with a named responsible party, budget and timeframe for each item. Do not treat the brand’s approval alone as permission to open.