The Direct Franchise Agreement serves as the primary legal instrument for establishing franchise relationships in the Philippines, subject to oversight by the Department of Trade and Industry. This document is essential when a business owner (franchisor) wishes to expand their business through franchising by granting rights to another party (franchisee) to operate under their business system and brand. The agreement must comply with Philippine franchise regulations, including the Intellectual Property Code and Consumer Protection Act, while addressing specific requirements for disclosure, registration, and operational standards. It typically includes comprehensive provisions for trademark usage, quality control, territory rights, fees, and dispute resolution mechanisms specific to the Philippine jurisdiction. The Direct Franchise Agreement is particularly crucial as it forms the foundation of the business relationship and must be structured to protect both parties while ensuring compliance with local laws and regulations.
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1. Parties: Identification of the franchisor and franchisee with complete legal names and addresses
2. Background: Context of the franchise business, history, and purpose of the agreement
3. Definitions: Detailed definitions of terms used throughout the agreement
4. Grant of Franchise: Specific rights being granted, territory, and exclusivity terms
5. Term and Renewal: Duration of the franchise agreement and conditions for renewal
6. Franchise Fees and Payments: Initial franchise fee, ongoing royalties, and payment terms
7. Intellectual Property Rights: Usage of trademarks, patents, and other IP owned by franchisor
8. Training and Support: Franchisor's obligations for initial and ongoing training
9. Operating Standards: Required operational procedures and quality standards
10. Marketing and Advertising: Marketing obligations and advertising fund contributions
11. Records and Reporting: Required financial records, reports, and audit rights
12. Confidentiality: Protection of trade secrets and confidential information
13. Non-Competition: Restrictions during and after the franchise term
14. Default and Termination: Grounds for termination and consequences
15. Post-Termination Obligations: Duties and restrictions after agreement ends
16. Governing Law and Dispute Resolution: Applicable Philippine laws and dispute resolution mechanisms
1. Multi-Unit Development Rights: Used when franchisee has rights to develop multiple units
2. E-commerce Rights: For franchises involving online operations or digital platforms
3. International Operations: When franchise involves cross-border operations
4. Equipment Leasing: If franchisor provides equipment to franchisee
5. Property Lease Requirements: When specific location requirements exist
6. Sub-Franchising Rights: If franchisee is granted right to sub-franchise
7. Co-Branding Provisions: When multiple brands may operate in same location
8. Halal Certification: For food franchises requiring religious compliance
9. Force Majeure: Extended provisions for business interruption scenarios
1. Schedule 1 - Business System Manual: Detailed operational procedures and standards
2. Schedule 2 - Initial Fee and Recurring Payments: Comprehensive fee structure and payment terms
3. Schedule 3 - Trademark and IP Details: List of protected marks and proper usage guidelines
4. Schedule 4 - Territory Map: Defined geographical boundaries of franchise territory
5. Schedule 5 - Initial Training Program: Training requirements and curriculum
6. Schedule 6 - Required Equipment and Supplies: Specifications for required equipment and approved suppliers
7. Schedule 7 - Marketing Guidelines: Approved marketing materials and procedures
8. Schedule 8 - Store Design and Layout: Required store design specifications
9. Schedule 9 - Insurance Requirements: Required insurance coverage and limits
10. Appendix A - Disclosure Statement: Required DTI franchise disclosure documents
11. Appendix B - Financial Projections: Sample financial projections and assumptions
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