QFA: Clarify how operations will continue when a master licence ends

The Quality Franchise Association (QFA) has urged franchise investors in the Philippines to establish what will happen to their outlets when the local franchisor’s master licence ends. In guidance published on 12 November 2026, it stressed that operations could be affected even if the outlet owner is up to date with all payments.

Understand where the authority comes from

Under a master franchise arrangement, the brand owner grants a local company rights for a defined territory. These may include permission to grant franchises to other businesses, but the scope of each local company’s authority varies.

According to the guidance, it is not enough to check that the company signing the agreement is currently authorised. Investors also need to know how long that authorisation lasts and whether it covers the full term being offered to them.

Investors should seek explanations and supporting evidence covering the expiry date of the master agreement, permission to grant franchises to others, and any conditions that could bring those rights to an early end. They should also ask whether their outlet requires separate approval from the brand owner.

For the franchise community, the key distinction is this: the contract with the local company may depend on another agreement to which the outlet owner is not a party.

The brand owner will not automatically take over

QFA explained that the Philippines has no single comprehensive law covering every aspect of franchising. General contract law under the Civil Code applies. Article 1306 allows parties to set contractual terms, provided these do not contravene the law, morals, good customs, public order or public policy.

Executive Order No. 169 of 2022 also provides protections for micro, small and medium-sized enterprises taking up franchises. These include minimum requirements for the content of contracts within its scope and registration of the relevant agreements with the Department of Trade and Industry.

However, this does not guarantee that the brand owner will assume all the local franchisor’s obligations.

Republic Act No. 8293, or the Intellectual Property Code, is also relevant. For agreements that qualify as technology transfer arrangements, Section 87 sets out prohibited clauses and Section 88 specifies mandatory provisions. The guidance recommends having a lawyer review compliance with these requirements and any exemptions needed.

Put the arrangements for continuing the contract in writing

Before making any payment, investors should clarify whether there is a mechanism for transferring the contract to the brand owner or a newly authorised franchisor when the master licence ends.

A promise that another company will take over is not enough. The written terms should identify who may step in, what event will trigger the transfer, and whether the outlet owner’s consent is required. If the protection depends on the brand owner, there must be documentary evidence of its agreement.

It is also important to establish whether the remaining contract term, fees and scope of support will be preserved. Investors should ask whether the transfer will involve a new upfront fee or compulsory equipment replacement.

Preparations should also include clear notification arrangements: when the termination or non-renewal of the master licence will be communicated, who will give notice, and what information affected businesses will receive.

Prepare the outlet for the transition between franchisors

Even if a successor has been appointed, there may be a gap before operations run smoothly. QFA suggested listing essential requirements: supplies, access to the point-of-sale system, the right to use the brand, training and technical support.

For each requirement, the parties should specify who is responsible during the transition and how long that responsibility lasts. They also need to clarify how advance payments, undelivered products and obligations to customers will be handled. Investors should not assume that everything will automatically transfer to the new company.

Practical reminder: Before committing capital, have the local franchisor’s authority and the written plan for continuing the contract reviewed. Make sure it is clear who will take over support and liabilities when the master licence ends.