QFA: Clarify responsibility for franchise employees

The Quality Franchise Association (QFA) has urged businesses preparing to franchise to clarify responsibility for employees before offering a franchise agreement. In guidance published on 30 October 2026, it stressed that the written division of responsibilities should reflect how an outlet is actually managed—not just be addressed once a complaint about pay or dismissal arises.

Naming the employer in the contract is not enough

According to the guidance, under a typical arrangement, the franchisee runs their own business and hires its employees. However, simply stating in the agreement that the franchisee is the employer is not enough.

What also matters is who actually selects and recruits workers, pays their wages, has the power to dismiss them and controls how they work. Businesses therefore need to examine not only who is named as responsible in the documents, but also how the outlet operates day to day.

Before expanding, the QFA advises drawing up a list of staffing decisions. For each activity, businesses should identify who makes the decision, who provides support and which document records the responsibility.

This includes advertising vacancies, interviewing applicants, signing employment contracts and setting pay. Responsibility should also be clear for work schedules, leave, overtime, performance reviews, disciplinary action, payroll and mandatory contributions.

Keep brand standards separate from disciplinary action

Franchisors may set standards for cleanliness, product quality and customer service. But the QFA says these must be enforced carefully so that responsibility for managing workers remains clear.

Where a breach of standards is identified, the guidance suggests reporting it first to the outlet’s designated manager. The report should identify the standard that has not been met and the operational correction required.

Any appropriate disciplinary action should be left to the relevant employer and comply with the law and due process. The franchisor can then check that the operational issue has been resolved without taking over management of the employee.

A separate procedure is also needed for immediate safety risks. The guidance stresses that waiting for authorisation must not be a reason to allow dangerous work to continue. This procedure should be documented alongside the normal reporting and corrective-action process.

Budget for the full working day

Before taking on the first franchisee, cost projections should include realistic staffing requirements. According to the QFA, it is not enough simply to count the people needed during quiet trading periods.

Budgets should allow for breaks, days off, annual leave, cleaning, receiving deliveries and closing duties. These all form part of the staffing requirements that need to be reflected in the budget before opening.

The guidance also advises checking the applicable minimum wage for the region and type of business. Other considerations include statutory benefits, such as thirteenth-month pay for eligible employees, as well as overtime and public holiday pay where applicable.

Registration and contributions to the Philippines’ Social Security System (SSS), PhilHealth health insurance programme and Pag-IBIG savings and housing fund should also be arranged in accordance with current rules. To support implementation, the guidance recommends preparing template employment contracts, attendance and payroll records, leave policies and disciplinary procedures that a lawyer or employment adviser can adapt as required.

Review the agreement and staff policies together

The QFA noted that the Philippines has no single comprehensive law covering every aspect of franchising. Specific rules do exist, including Executive Order No. 169, series of 2022, which provides protections for franchisees that are micro, small and medium-sized enterprises.

However, this does not replace the Labour Code, wage orders or other employment legislation. The Civil Code’s general rules on contracts are also relevant, but an agreement cannot be used to remove workers’ statutory rights.

For the franchise community, the closing advice is practical: have the franchise agreement and staff policies reviewed together. Before opening, make sure the employer is clearly identified, the budget is sufficient and the limits of each party’s authority are documented.