QFA: Check your franchise renewal rights

A well-performing outlet is no guarantee that a business can continue trading under the same brand when its agreement expires. In guidance published on 9 November 2026, the Quality Franchise Association (QFA) reminded prospective franchisees to check renewal rights, conditions, fees and notice periods before signing a franchise agreement.

A right to renew, or merely permission to apply?

The guidance centres on the distinction between two provisions: permission to request renewal and a right to renew once specified conditions have been met. They may look similar at first glance, but they do not offer franchisees the same level of certainty.

If an agreement merely allows a franchisee to request renewal, the franchisor may retain broad discretion to accept or reject that request. Submitting an application does not, in itself, mean that continued operation has been approved.

A provision granting a right to renew subject to conditions is different. Here, it is important to establish exactly what those conditions are and how compliance will be determined. The key question before signing is whether there is a right to continue, or simply an opportunity to have an application considered again.

For the franchise sector, this distinction matters for business planning. According to the guidance, even strong outlet performance does not guarantee continued use of the brand. Both parties should be clear about what to expect when the current agreement ends.

What does the law say about renewal?

The QFA explained that the Philippines has no single comprehensive law covering every aspect of commercial franchising. However, specific rules and general laws apply to franchise agreements.

These include Executive Order No. 169, series of 2022, which establishes protections for micro, small and medium-sized enterprises taking on franchises. Renewal provisions are among the minimum terms required in agreements covered by the order.

This should not be interpreted as automatically obliging a franchisor to renew. The actual conditions in the contract remain important. A requirement to include a renewal provision is not the same as a guaranteed further term.

The guidance also referred to Article 1306 of the Civil Code. This allows parties to set contractual terms, provided they do not conflict with the law, morals, good customs, public order or public policy. It is therefore not enough simply to look for the word ‘renewal’: the entire provision and its associated conditions need to be read.

Clarify fees and notice requirements before signing

Alongside renewal rights, the QFA highlighted the cost of continuing the franchise. There is no general statutory cap on franchise fees, royalties or service fees. The agreed terms are important, while remaining subject to applicable law.

When reviewing a contract, prospective franchisees should ask whether a renewal fee applies, how much it is and how the amount payable will be determined. They should also clarify which charges will continue and what the agreement says about them for the next term. These questions should be answered by reference to the contract, rather than by assuming that all agreements are alike.

Notice periods also need attention. When must the franchisee give notice of their intention to renew? What must be submitted? The QFA advises checking these deadlines before signing, rather than waiting until the term is close to expiry.

Do not confuse commercial franchises with congressional franchises

The guidance also clarified the distinction between a commercial franchise and a franchise granted by the Philippine Congress. The 50-year limit associated with public utility franchises is not a general rule governing the length of a franchised outlet’s contract.

That limit should therefore not be used as a basis for expectations about the duration or renewal of an agreement with a brand. What matters is the term specified in the contract itself and the applicable rules.

Practical step: Before signing, establish four things: renewal rights, conditions, total fees and notice deadlines. Clarify any ambiguous provisions before relying on a further term.