To avoid more people being scammed by fake Franchisors selling their franchises(particular cart Franchises), the DTI came out with a Bureau Order (10-24 Series of 2010) to assist Franchise Buyers not being victimized by unscrupulous franchise sellers. We actually actively support the Bureau Order and prepare the FDI for all our clients.
Bureau Order No. 10-24 Series of 2010
Subject: Advisory on Due Diligence to be Undertaken by a Prospective Franchisee
In order to protect the interest and welfare of a prospective franchisee, the DTI-Bureau of Trade Regulation and Consumer Protection (BTRCP) has issued the following Advisory:
1. Scope and Coverage
This advisory is addressed to persons engaged or interested in the franchise business.
2. Definition of Terms
2.1. “Franchise Agreement” is a written contract or agreement between two or more parties by which a Franchisor grants the Franchisee the right to engage in the business of offering, selling, or distributing goods or services under a marketingplan/system/concept, for a certainconsideration. Unless otherwise provided, said right includes the use of a trademark, service mark, trade name / business name, know-how, logo-type advertising, or other commercial symbols associated with a particular business.
2.2. “Franchisor” is a person, individual or a Corporation, duly registered with the Department of Trade and Industry (DTI) or the Security Exchange Commission (SEC).
2.3. “Franchisee” is a person, individual or a Corporation duly registered with the Department of Trade and Industry (DTI) or the Security Exchange Commission (SEC)
2.4. “Franchise Disclosure Information” refers to a set of information and documents that needs to be disclosed by the Franchisor to the Franchisee and / or prospective Franchisee.
3. Due Diligence to be undertaken by a prospective Franchisee
Before a person decides to engage in or acquires a franchise business, due diligence should be done by the prospective franchisee.
3.1. Secure or ask Disclosure Information for the Franchisor as follows:
3.1.1. Business address, email address, internet home page / website, fax numbers and other contact details
3.1.2. Copy of DTI or SEC Registration
3.1.3. Parent companies and affiliates, if any, and their respective roles in the Franchise, and Franchisors declaration if any affiliate is a supplier and what they will supply
3.1.4. Names of the Board of Directors and officers with a brief description of their qualifications and background, ownership of interests and references
3.1.5. The contact number and business location of existing Franchisees
3.1.6. Executed promotional / marketing materials
3.1.7. Description of the business concept, which includes brand image, brandpersonality, unique selling proposition, target market, mission and vision, among others
3.1.8. Basic information on training,
commercial and / or technical assistance
3.1.9. Certificate that the Franchisor is a member in good standing of any Franchisor Association and that the Franchisor has not pending administrative, civil or criminal case
3.1.10. Declaration of the Initial Fee, amount that will be collected and services covering these fees
3.1.11. Training that will be provided, number of persons, how long and training modules
3.1.12. Number of years Company has operated and number of years it has franchised with corresponding numbers of company owned branches and franchised outlets
3.1.13. Draft of Franchise Agreement
3.1.14. Full disclosure of the Financial requirements of the franchise business
3.1.15. A provision that requires the franchise applicant to seek adequate legal and financial counsel before signing the Franchise agreement
3.1.16. Mechanism for dispute resolution
3.2. Call or visit or consult any of thefollowing:
3.2.1. Franchisor Association (FIFA 9995. 0734)
3.2.2. Nearest DTI Regional or Provincial Offices
3.2.3. Securities and Exchange Commission
3.2.4. DTI Direct (Telephone
Number +632 7-791-3321)
3.2.5. Certified Franchise Executive
3.2.6. Franchise Consultant (RK Franchise 8912.2946, 8912.2973)
4. Franchisor Association or
To establish a databank of Franchisor association or organization nationwide, Franchisor association or organization should submit to DTI-Bureau of Trade Regulation and Consumer Protection (BTRCP) the following documents:
4.1. A certified true copy of its Article of Incorporation and By-Laws
4.2. A current certified true copy of
Certificate of Good Standing from the SEC
4.3. Updated list of trustees, officers and members of the organization including their addresses and
4.4. Other pertinent documents such as Code of Ethics and Standards.
5. Self-Policing of Members
This Advisory aim to promote and encourage the Franchise industry to self-police its own ranks by setting a Code of Ethics and Standards for grievance or dispute resolution mechanism to redress complaints against its members, including issues arising from transactions with their franchisees,
prospective or otherwise.
This advisory shall be published in
newspapers of general circulation and shall be part of the DTI Information, Educational and Communication Program. Issued this 17th day of November 2010 in Makati City
VICTORIO MARIO A. DIMAGIBA
NOTE: All clients of RK Franchise
Consultancy become member of FIFA Filipino International Franchise Association. RK and FIFA were the 1st Consultant and
Association respectively to register with the DTI under the Bureau Order.