QFA: A clear process for remedying franchise breaches

In guidance published on 31 October 2026, the Quality Franchise Association (QFA) stressed the need for a clear and fair process when a franchise agreement is breached. For the franchise community in the Philippines, the guidance focuses on written notice, a reasonable period to remedy the breach and a review of the evidence before a problem is considered resolved.

First, identify the obligation that has not been met

According to the QFA, setting standards before offering a business as a franchise is not enough. A process for remedying failures to meet those standards must also be prepared. Examples cited include late submission of reports, the use of incorrect materials in an outlet and failure to follow required procedures.

The first step is to identify the precise obligation that has not been met and where it is set out: in the agreement, the manual or a policy that has been properly communicated. It is important to distinguish between a breach by the franchisee and a shortcoming in the business system itself.

The QFA also suggested testing the process at a company-owned outlet before expanding through franchising. A manager could be asked to assess whether the written instructions are sufficient to identify and correct a shortcoming without having to guess what the owner expects.

Align the process with the agreement and the law

The guidance highlighted Executive Order No. 169, series of 2022, as an important framework in the Philippines. It provides safeguards for small businesses taking on franchises, including requirements for the content of agreements within its scope and registration with the Department of Trade and Industry (DTI).

These provisions cover the grounds for and consequences of terminating an agreement, as well as dispute resolution mechanisms. However, the QFA clarified that this does not mean a single, automatic period for remedying every type of breach applies.

A legal review of the order’s scope, current DTI rules and the contract itself is recommended. The Civil Code is also relevant to the validity and performance of the agreement. Where use of a trade mark is at issue, the Intellectual Property Code, or Republic Act No. 8293, may also be relevant.

Under the QFA’s Code of Conduct, members must provide written notice and a reasonable period to remedy a breach. The guidance made clear that this is a standard set by a voluntary association, not a law that automatically applies to everyone. Nor should penalties or rights to suspend be introduced without a proper basis.

Give clear notice, not simply a threat

According to the guidance, a notice should explain what happened, what needs to change and how completion of the remedial action will be verified. The QFA recommended preparing a notice template containing the following:

• Specific facts: the date, outlet and observations, supported by records.
• Basis of the breach: the relevant provision of the agreement or standard in the manual.
• Required remedial action: concrete steps that can be verified.
• Deadline: a clear completion date, rather than simply saying “immediately”.
• How to respond: the person to contact and the documents to submit.
• Next steps: action permitted under the contract if the breach is not remedied.

The notice should be delivered using a method recognised by the contract. Proof of sending and receipt should also be retained. A message should not be assumed to have been read simply because it was posted in a group chat.

Allow time and verify the remedy before closing the matter

The period allowed for remedial action should reflect the risk, the scope of the work and what the franchisee can reasonably achieve. Correcting an inaccurate report, for example, is different from replacing equipment that must be delivered from elsewhere. If an extension is granted, the reason and revised deadline should be recorded.

Where there is an immediate risk to health or safety, urgent action consistent with the law and the contract may be necessary. The standard process should not be used as a reason to allow dangerous practices to continue.

The QFA also suggested appointing someone to review the evidence of remedial action. Once the requirements have been met, written confirmation should be sent stating that the specific matter is closed. If the response remains inadequate, any outstanding shortcomings should be identified rather than new standards being introduced without explanation.

Practical reminder: Before offering a franchise, prepare a notice template, a deadline log and a method for verifying remedial action. Have these reviewed to ensure they align with the contract and the law.