Choosing a Franchise Partner in the Philippines

Once your business is ready to franchise, it is easy to be drawn to the first applicant who can afford the fees. But choosing a partner is not simply a matter of selling the right to use your brand. In a franchise network, the ability to run the business, follow the system and work collaboratively matters. Before accepting applications, develop a process that assesses these qualities—not just the amount of money an applicant can put forward.

1. Define the partner your business needs

Start with the day-to-day work in your existing business. Which decisions need to be made every day? How often does the owner need to be on site? Can operations be entrusted to a trained manager, or is the franchisee’s personal involvement essential?

Turn your answers into written criteria. These might include:

• The ability to commit time to operations and training.
• Experience managing people, money or customer relationships.
• A willingness to follow established procedures, even when they have suggestions of their own.
• The ability to understand records of sales, expenses and liabilities.
• Realistic expectations about the work and risks involved in running a business.

Distinguish between qualities applicants must already have and skills they can learn. For example, you can teach someone to use a payment system, but a repeated habit of withholding information is harder to address. Do not automatically use qualifications or previous job titles as selection criteria if they are not necessary to run the business.

2. Request evidence at the right stage

At the initial application stage, it is enough to ask about experience, reasons for applying, the applicant’s intended role in the business and their general capacity to invest. Explain from the outset that submitting an application does not guarantee acceptance or the allocation of a location.

Once there are reasonable grounds to proceed, request the documents needed to verify key claims. These may include an employment or business history, proof of identity, relevant business documents and evidence of available funds. Do not request large amounts of sensitive documentation simply because that is how things have always been done.

When assessing finances, look beyond the initial fee. Ask whether the money set aside comes from personal funds, borrowing or contributions from others. Establish whether the applicant clearly understands the costs involved while the outlet is getting established. This is not an assurance that their capital will be sufficient; it is an assessment of whether they understand the commitment they are taking on.

If business partners are involved, ask who will actually manage the outlet and how decisions will be made. An applicant with sufficient funds but no clear management arrangements may not yet be ready to proceed.

3. Use scenario-based interviews

Prepare the same core questions for every applicant. Comparing answers is easier when you assess the same things, rather than relying on a pleasant conversation or personal rapport.

Try questions such as:

• “If sales are weak during the first few months, what would you examine first?”
• “What would you do if a high-performing employee wanted to bypass an established procedure?”
• “How would you put forward a suggestion to change a product?”
• “When you cannot get to the outlet, who will deal with problems?”

Look for the applicant’s approach to thinking through a problem, rather than a rehearsed answer. Can they ask questions, use records and seek help? Do they understand that they are not automatically free to change the system?

You can also arrange an outlet visit so the applicant can see how the work is done. Make this an introduction and an opportunity to observe, not a source of unpaid labour. Afterwards, ask them to explain which aspects they could manage and where they would need support.

4. Distinguish selection from legal compliance

A thorough applicant assessment is no substitute for a properly prepared agreement. The Philippines does not have a single comprehensive law covering every aspect of franchising, but specific rules do apply.

Executive Order No. 169, series of 2022, sets minimum content and Department of Trade and Industry (DTI) registration requirements for franchise agreements within its scope involving micro, small and medium-sized enterprises. Key matters include fee disclosure, a cooling-off period and alternative dispute resolution. The Civil Code also applies to contractual obligations, while the Intellectual Property Code governs the use of trademarks and associated know-how.

Ask a lawyer to review how these requirements apply to your franchise offering. Keep preliminary screening approval separate from final approval and signing. Also give applicants an opportunity to ask questions and obtain independent advice.

5. Record the reasons for your decision

Use a simple assessment record covering the criteria, supporting evidence, outstanding questions and decision. An application may be accepted, deferred while gaps are addressed, or declined. Where possible, have another responsible person review the recommendation before giving a final response.

Do not lower your standards simply because you need to collect a fee. Communicate the decision courteously, and do not promise acceptance without sufficient grounds.

Practical summary: Before accepting your first applicant, prepare your selection criteria, evidence requirements and interview guide. Choose someone who can run the business and work with you—not just someone who can pay.