Setting Up a Complaints System Before Franchising a Business in the Philippines

Before franchising your existing business, make sure it can deal with problems even when you are not at the branch. Inconsistent responses to complaints can undermine trust in the entire brand. A franchise network needs a system that sets out who takes action, what information is required and how to confirm that a problem has genuinely been resolved.

1. Separate customer complaints from disputes between franchise partners

An incorrect product order should not follow the same process as a dispute over contractual obligations. These issues may be connected, but responsibility and the methods for resolving them differ.

For customer complaints, the branch is usually the first to respond. These may concern incorrect charges, product quality, delays or staff conduct. Managers should know when they are authorised to replace a product or issue a refund, in line with the law and company policy.

For disputes between the franchisor and franchisee, establish a separate submission and review process. Examples include promised support that has not been provided or disagreements over responsibility for an incident.

Also establish an urgent reporting channel for potential risks to health, safety or personal data. These incidents should not have to wait for a routine meeting.

2. Define authority and responsibility before opening

Draw up a short list of common problems and assign someone with decision-making authority to each. Avoid making the franchisor the sole approver: responses will become slower as the number of branches grows.

For each type of complaint, identify:

• First point of contact: who will listen and record the complaint;
• Decision-maker: who can approve an appropriate remedy;
• Escalation contact: who will act if the branch cannot resolve the issue;
• Follow-up owner: who will verify that the agreed action has been carried out.

Set realistic target times for acknowledging complaints, providing an initial response and reporting the outcome. Present these targets as business service standards, not as automatic statutory deadlines.

Also clarify who will cover costs while the cause is being investigated. For example, a customer may need immediate assistance before it is clear whether the mistake originated at the branch or a central preparation facility. Do not delay an appropriate remedy simply because the franchise partners are still disputing responsibility.

3. Align the process with the law and the franchise agreement

The Philippines has no single comprehensive franchise law, but that does not mean franchising is free from specific regulation. Executive Order No. 169, series of 2022, sets out protections for covered franchise agreements involving micro, small and medium-sized enterprises. Required provisions include a dispute resolution mechanism, which may involve mediation or voluntary arbitration.

It also directs the Department of Trade and Industry (DTI) to establish a register of covered agreements. Before offering a franchise, check the current procedures and applicable registration obligations with the DTI. This does not replace business registration or local permits.

It is important to correct a misleading reference found in some guides: Republic Act (RA) 9178 is not a franchise law. It is the Barangay Micro Business Enterprises Act of 2002, concerning micro-businesses at the local community level.

The Civil Code also governs obligations and contracts, while RA 7394, the Consumer Act of the Philippines, applies to relevant commercial matters. Have a lawyer review your process to ensure it does not restrict a customer's right to approach the appropriate agency. Internal resolution is not a substitute for statutory rights.

4. Keep records securely and use complaints to make improvements

Maintain a single complaints register containing the case number, branch, date, type of problem, action taken and status. Distinguish verified facts from allegations or assumptions. Record whether the complainant accepted the response, but do not require them to sign a broad waiver of rights simply to receive an appropriate remedy.

RA 10173, the Data Privacy Act of 2012, governs the processing of personal information. Collect only what is necessary, restrict access and set a reasonable retention period. Do not post receipts, telephone numbers or details identifying complainants in widely accessible group chats.

Regularly review recurring causes. If the same complaint arises across several branches, the system may need changing rather than the actions of a single employee. Test the process using a fictional complaint before taking on your first franchise partner.

Practical summary: Before expanding, put in place a clear allocation of responsibilities, secure reporting channels and a defined escalation process. Effective complaints handling protects customers and provides a foundation for trust across the franchise network.