Franchise Disclosure Requirements in the Philippines: What to Know Before DTI Registration

Franchise disclosure requirements in the Philippines are not governed by a single dedicated franchising statute. Instead, they arise mainly from the Consumer Act of the Philippines (Republic Act No. 7394), which requires suppliers to give accurate information about consumer products, services, and credit, and which prohibits deceptive, unfair, and unconscionable sales acts and practices. Before registering a franchise with the Department of Trade and Industry (DTI), a franchisor should ensure that all material information given to prospective franchisees is complete and truthful. Registration with the DTI is a separate business-name and regulatory step; it does not replace the duty of honest disclosure to franchisees.

What the law says about franchise disclosure

The Consumer Act declares it State policy to protect consumers against deceptive, unfair, and unconscionable sales acts and practices, and to provide information and education so consumers can make sound choices. Under **** of the law, these objectives include protecting consumers from hazards and from misleading sales conduct, and giving them adequate information before they commit to a transaction.

A franchise arrangement is a consumer transaction in the broad sense used by the law. The term covers a sale, lease, assignment, or other disposition of consumer products or services, as well as the grant of credit to a consumer, and even the solicitation or promotion of such a transaction. The franchisee is a consumer — a natural person who is a purchaser, lessee, recipient, or prospective purchaser of consumer products, services, or credit. The franchisor is a supplier — a person who, in the course of business, solicits, offers, advertises, or promotes the supply of a consumer product or service, or who participates in a consumer transaction, whether or not there is privity of contract with the consumer.

Because of this, the franchisor has a legal duty to disclose accurate information about the business being offered. The law requires that the best interest of the consumer be considered in interpreting and implementing its provisions, including its implementing rules and regulations (****).

Information that must be accurate and complete

The Consumer Act defines advertising as the business of making available to the public, through any form of mass media, facts, data, or information about the attributes, features, quality, or availability of consumer products, services, or credit. A label or labeling is the display of written, printed, or graphic matter on a product, its container, or accompanying material, giving information about identity, components, ingredients, attributes, directions for use, and specifications.

In a franchise context, the disclosure document, brochure, and marketing materials serve a similar function. They must not misstate the nature, quality, or prospects of the business. The law prohibits deceptive, unfair, and unconscionable sales acts and practices, and requires that consumers be given enough information to exercise their rights properly.

A franchisor should therefore be prepared to disclose, in clear terms:

• The identity and background of the franchisor;
• The nature of the franchise being offered;
• The fees, royalties, and other amounts payable;
• The obligations of both parties under the franchise agreement; and
• Any material facts that would affect the franchisee's decision.

What DTI registration covers

Registering a business name or franchise with the DTI is a separate requirement from disclosure. The DTI registration confirms the right to use a business name and complies with trade and consumer protection regulations. It does not, by itself, certify that a franchisor has complied with disclosure duties. A franchisee dealing with a DTI-registered franchisor still has the right to accurate information under the Consumer Act.

Prohibited practices to avoid

The Consumer Act prohibits sales acts and practices that are deceptive, unfair, or unconscionable. In franchise dealings, this means a franchisor may not:

• Misrepresent the potential earnings or success rate of the franchise;
• Conceal material fees, restrictions, or termination conditions;
• Use false or misleading advertising about the franchise opportunity; or
• Pressure a prospective franchisee into signing without adequate information.

The law also empowers the DTI, as the implementing agency for consumer products not covered by the Department of Health or the Department of Agriculture, to enforce these provisions.

Frequently asked questions

Is there a franchise disclosure law in the Philippines? There is no single standalone franchise disclosure statute. Disclosure duties come primarily from the Consumer Act of the Philippines, which requires suppliers to give accurate information and prohibits deceptive sales practices.

Do I need to register a franchise with the DTI before selling it? DTI registration is a business-name and regulatory step. It is separate from the legal duty to disclose accurate information to prospective franchisees under the Consumer Act.

What happens if a franchisor gives false information? The Consumer Act prohibits deceptive, unfair, and unconscionable sales acts and practices. A franchisor that misleads a franchisee may face administrative action and liability under the law.

Practical takeaways

• There is no single Philippine franchise disclosure statute; the Consumer Act of the Philippines (RA 7394) supplies the main disclosure and fair-dealing rules.
• A franchisee is a consumer and a franchisor is a supplier under the Consumer Act, so the law's protections apply.
• Disclosure must be accurate and complete; deceptive, unfair, and unconscionable sales acts are prohibited.
• DTI registration is separate from disclosure and does not substitute for it.
• Keep written records of all information given to prospective franchisees to show compliance.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 11232 - AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES

• REPUBLIC ACT NO. 7394 - THE CONSUMER ACT OF THE PHILIPPINES

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.