Site Approval Before Franchising Your Business

Not every busy location is right for your business. Before franchising your existing shop, you need to establish how prospective franchisees will select, assess and obtain approval for their premises. In the Philippine franchise market, a clear process helps prevent costly alterations, money tied up in deposits for unusable premises, and openings at sites that cannot support your business model.

1. Set measurable criteria for a suitable site

Start with the actual needs of your existing business, rather than the appearance of your favourite branch. Identify which site characteristics are essential to operations and which can be adapted.

For example, if your shop relies on brisk lunchtime sales, the number of potential customers at that time matters more than total footfall throughout the day. If products must be prepared on site, an adequate water supply, drainage and electrical capacity may be non-negotiable.

Create a checklist with three categories:

• Essential requirements: safe access, permitted use of the building, sufficient floor space and essential facilities.
• Adaptable features: equipment layout, lighting, storage and certain aspects of the shopfront.
• Grounds for rejection: restrictions on essential cooking activities, insufficient electrical capacity that cannot be upgraded, or access that is incompatible with delivery arrangements.

Specify the evidence required for each criterion. An agent’s verbal assurance that something “should be fine” is not enough. Request plans, written permission and an assessment by a suitably qualified professional where technical issues arise.

2. Set out a staged assessment before committing money

Separate preliminary acceptance of a site from final approval. The surrounding area may look promising, but the premises may prove unsuitable once the building or lease terms have been assessed.

During the initial assessment, request the exact address, photographs, floor area, asking rent and the landlord’s general terms. Record nearby businesses and how customers will reach the premises.

During site visits, observe the location at different times and on days relevant to your business. Check queuing arrangements, parking, drop-off points, goods deliveries, waste disposal and access when it rains. Avoid basing your decision on a single busy visit.

During the technical assessment, have the capacity of the utilities and facilities checked, and estimate the alterations required. Clarify who will pay for repairs to the roof, the main water supply line or defects that existed before the tenant took possession.

For the final decision, issue written approval, conditional approval or rejection. Record the reasons, any outstanding actions and the person authorised to sign. This decision is an assessment of suitability, not a guarantee of sales or profit.

3. Align the lease with the franchise agreement

A franchisee may find themselves committed to paying rent before they are entitled to use the brand or open the shop. Both agreements should therefore be reviewed together before signing.

Discuss the following with a solicitor or local lawyer and the landlord:

• Term and commencement: Does the period of occupation align with the right to operate the franchise? When does rent become payable?
• Permitted use: Does the lease clearly cover the actual products, preparation activities, deliveries and operating hours?
• Alterations to the premises: Who must approve the design, signage and installation of equipment?
• Transfer of rights: Is the landlord’s consent required if the operator changes or the business is transferred?
• Exit arrangements: Who will remove the branding and reinstate the premises to their original condition?

Where possible, negotiate clear conditions that must be met before obligations become binding, such as site approval and permission for necessary alterations. These are not automatic rights: the other party must agree to them, and they must be properly documented.

The Philippines has no single comprehensive law governing all franchises. The Civil Code is important for contractual and lease obligations, while the Intellectual Property Code governs the use of brands. Executive Order No. 169, series of 2022, also sets out specific rules for agreements involving micro, small and medium-sized enterprises as franchisees. These include minimum contractual provisions and the establishment of a register of agreements with the Department of Trade and Industry (DTI). Have the applicable scope and current procedures reviewed; a standard lease agreement alone is not enough.

4. Keep records and assign clear responsibility

Appoint a single coordinator to prevent conflicting advice from your team, agent and designer. Keep photographs, plans, assessments, approval conditions and final versions of the agreements in one central file.

Require renewed written approval if the floor area, rent, entrance or design changes. The initial approval should not automatically extend to different conditions.

Practical reminder: Before accepting a non-refundable payment or authorising construction work, make sure the site has been assessed, the conditions have been documented, and the key obligations under the lease and franchise agreement are aligned.