QFA: Review obligations to open multiple outlets

In guidance published on 28 October 2026, the Quality Franchise Association (QFA) emphasised the need to review agreements that require franchisees to open multiple outlets in the Philippines. For those in the franchise sector, it is important to distinguish between a right to expand and a binding commitment, even when funding or management capacity is not yet in place.

A right to expand or an obligation to open?

According to the guidance, permission to add outlets is not the same as an obligation to open a specified number within a set period. In the first case, the next step can depend on business performance. In the second, failing to meet the schedule could constitute a breach of contract.

Prospective franchisees therefore need to obtain and review all documents relating to expansion, not just the contract for the first outlet. There may be a separate area development agreement as well as an individual contract for each outlet.

Points to clarify include the number of outlets required, the deadline for each and what counts as “opening”. Must construction have started, must the outlet be serving a limited number of customers, or must it be fully operational? It is also important to establish whether each location and contract requires fresh approval.

The guidance also highlights that permission to search for premises does not amount to approval of the chosen site. If an opening deadline is set but there is no clear timeframe for the franchisor’s review, some factors may be beyond the investor’s control.

Assess funding for each additional outlet separately

It is not enough simply to compare a discount on upfront fees for multiple outlets with the cost of buying each franchise separately. More important is establishing when funding will be needed for each outlet.

The QFA recommends a month-by-month expenditure schedule. This should cover the fee for development rights, individual franchise fees, rental deposits, equipment, opening stock, pre-opening wages and the cost of managing multiple locations.

It is also necessary to identify which payments are due immediately and which depend on site approval. If an upfront payment is required, seek written clarification on whether it will be offset against fees for subsequent outlets. Do not assume that such an offset applies or that any unused amount will be refunded.

The guidance raises another question: what if the first outlet has not yet generated surplus cash when funding is needed for the second? Establish whether the next opening can go ahead without drawing on money needed for day-to-day operations. If borrowing is required, loan disbursements must align with payment deadlines; an anticipated loan approval is not yet available funding.

Understand the consequences if expansion does not go ahead

It is important to assess whether failing to open one outlet could affect those already operating successfully. Losing the right to add outlets is different from losing the right to continue running an existing business.

According to the guidance, a lawyer should explain whether any fees remain payable even if expansion does not proceed. It is also necessary to clarify whether a breach of one agreement will be treated as a breach of all contracts, and whether an outlet can continue operating under its own agreement.

The parties could discuss a review before work begins on each subsequent outlet. This could take account of actual management capacity, the availability of suitable premises and confirmed funding. However, these conditions must be agreed: there is no automatic right to change the schedule.

A written process for postponing openings or reducing the number of outlets provides a clearer basis than a verbal promise that the other party will be flexible.

Consider both the contract and the law

The QFA noted that the Philippines has no single comprehensive law covering every aspect of franchising. Executive Order No. 169 focuses on protecting micro, small and medium-sized enterprises in the franchise sector, but it does not replace a review of each contractual obligation.

Article 1306 of the Civil Code is also relevant: it allows parties to set contractual terms subject to the law and the other limits specified in that provision. An obligation should not be assumed to be invalid simply because it is difficult to fulfil. For agreements involving the transfer of technology or systematic knowledge, the guidance also referred to Republic Act No. 8293, including Sections 87 and 88.

Practical reminder: Have the main agreement and individual outlet contracts reviewed together. Choose a scale of expansion you can fund and manage, not simply the option offering the largest discount.