QFA: Management capability is key to choosing franchisees

The ability to pay does not, on its own, make someone a suitable franchisee. In guidance published on 9 November 2026, the Quality Franchise Association (QFA) emphasised the need for a clear assessment of applicants’ skills, available time and expectations. For the Philippine franchise sector, selection should be based on the ability to run a business and work collaboratively, not simply on how much money an applicant can invest.

Start with the day-to-day work in the outlet

According to the QFA, franchisors should first review the daily tasks involved in their existing business before accepting applications. Questions include which decisions need to be made each day, how often the owner needs to be present, and whether operations can be entrusted to a trained manager.

This review can form the basis of written selection criteria. These should establish whether the franchisee’s personal involvement is essential or whether oversight through a manager is sufficient. This makes the applicant’s expected role clear before they are accepted.

The guidance lists several capabilities to assess: the ability to commit time to operations and training, experience in managing people and money, and customer service skills. Applicants should also understand sales records, costs and liabilities.

A willingness to follow established procedures is important too, even when applicants have ideas of their own. Suitability is not just a financial question; it also involves a realistic understanding of the work and risks involved in running a business.

Verify in stages rather than making immediate commitments

At the initial application stage, it is sufficient to ask about experience, reasons for applying, the anticipated role in the business and general investment capacity. The QFA recommends explaining from the outset that submitting an application does not guarantee acceptance or the allocation of a location.

Once there are reasonable grounds to proceed, franchisors should request the documents needed to verify key claims. These may include employment or business history, proof of identity, relevant business documents and evidence of available funds.

Financial checks need to go beyond the initial franchise fee. Franchisors should establish whether the investment will come from personal funds, borrowing or contributions from others. They should also ensure that applicants understand the costs involved while the outlet is starting up and becoming established.

Where partners are involved, it is important to identify who will actually manage the business and how decisions will be made. The group’s ability to provide capital is a separate issue from who will be responsible for day-to-day operations.

Use consistent questions and document decisions

The QFA suggests asking every applicant the same core questions. Answers are easier to compare when assessed against consistent criteria, rather than relying on informal conversations or a good personal rapport.

A simple assessment record should set out the criteria, supporting evidence, outstanding questions and decision. This makes it clear what has been verified and what still needs clarification before a response is given.

An application may be accepted, put on hold while gaps are addressed, or rejected. Where possible, the QFA also recommends having another responsible person review the recommendation before a final response is issued. Applicants should also have the opportunity to ask questions and seek independent advice.

Keep selection separate from the final agreement

The guidance makes clear that thorough applicant screening is no substitute for a properly prepared agreement. Passing the initial assessment, receiving final approval and signing the agreement should remain separate stages.

Although the Philippines has no single comprehensive law covering every aspect of franchising, specific rules apply. Executive Order No. 169, series of 2022, sets out minimum content and Department of Trade and Industry registration requirements for the franchise agreements involving micro, small and medium-sized enterprises that fall within its scope.

Key issues include fee disclosure, a cooling-off period and alternative dispute resolution. The Civil Code also governs contractual obligations, while intellectual property law applies to the use of trade marks and associated know-how. The QFA advises having a lawyer review the applicable requirements.

Practical reminder: Before accepting a franchisee, prepare your selection criteria, evidence requirements and interview questions. Choose someone who can manage the business and work collaboratively, not merely someone who can pay.