Franchise Renewal in the Philippines: Rights, Fees, and Refusal

Franchise renewal in the Philippines is not governed by a single franchise statute. Whether a franchisee has a right to renew depends primarily on the franchise agreement — the contract between franchisor and franchisee. Philippine law supplies the backdrop: the Intellectual Property Code (Republic Act No. 8293) governs the trademark and technology-transfer licenses that usually sit at the heart of a franchise, while the Revised Corporation Code (Republic Act No. 11232) governs the corporate vehicle that operates it. If the contract grants a renewal option, the franchisor must honor it. If it does not, renewal is generally a matter of negotiation, not right.

What a franchise really is under Philippine law

A franchise is a contractual relationship. The franchisor licenses its brand, system, and know-how to the franchisee, who operates under the franchisor's marks and standards in exchange for fees.

The Intellectual Property Code defines technology transfer arrangements as contracts involving the transfer of systematic knowledge for the manufacture of a product, the application of a process, or the rendering of a service, including management contracts, and the transfer, assignment, or licensing of all forms of intellectual property rights. Many franchise agreements fall within this definition because they license trademarks and system knowledge together.

Under the Intellectual Property Code, the Documentation, Information and Technology Transfer Bureau of the Intellectual Property Office (IPO) is tasked with registering technology transfer arrangements and settling disputes involving technology transfer payments. This matters at renewal: if the renewal involves a new or amended technology transfer arrangement, registration with the IPO may be required.

Does a franchisee have a right to renew?

There is no Philippine statute that automatically grants a franchisee the right to renew. The answer is found in the four corners of the franchise agreement.

• Express renewal option. If the contract states that the franchisee may renew for a specified period upon meeting stated conditions, that option is enforceable. Conditions typically include payment of a renewal fee, compliance with system standards, and notice within a deadline.
• No renewal clause. If the contract is silent, the franchisee has no automatic right to renew. The franchisor may decline, subject to general contract law and any applicable rules on good faith.
• Expired term. Once the term ends without renewal, the franchisee's license to use the marks ends with it. Continued use of the franchisor's trademarks after expiration may expose the franchisee to an infringement or unfair competition claim under the Intellectual Property Code.

The Intellectual Property Code protects trademark owners against unauthorized use. A franchisee whose renewal is refused and who keeps trading under the brand does so at legal risk.

The renewal process: a practical sequence

Because renewal is contract-driven, the steps follow the agreement. A typical sequence looks like this:

1. Check the notice deadline. Franchise agreements usually require written notice of intent to renew weeks or months before expiry. Missing it can forfeit the option.
2. Review the conditions. Confirm the renewal fee, updated terms, and any new franchise agreement the franchisor requires.
3. Settle outstanding obligations. Unpaid royalties, advertising contributions, or supply balances are common grounds for refusing renewal.
4. Execute the renewal documents. A renewal often means signing a new agreement, not merely extending the old one.
5. Register where required. If the arrangement involves a technology transfer or a trademark license, confirm whether registration with the IPO is needed.
6. Update corporate records if necessary. If the franchisee is a corporation and the renewal changes its articles or officers, the Revised Corporation Code requires the corresponding filings with the Securities and Exchange Commission.

Fees and costs of renewal

Philippine law does not fix franchise renewal fees. They are commercial terms set by the franchisor and are typically expressed as a renewal fee, an ongoing royalty, and a continuing advertising or brand fund contribution.

What the law does regulate is the technology transfer payment side. Under the Intellectual Property Code, the IPO's Documentation, Information and Technology Transfer Bureau handles the registration of technology transfer arrangements and disputes over technology transfer payments. If a renewal changes the royalty structure, that change may need to be reflected in the registered arrangement.

For the corporate side, the Revised Corporation Code governs filings with the Securities and Exchange Commission, including amendments to the articles of incorporation. A corporation may amend its articles by a majority vote of the board and the vote or written assent of stockholders representing at least two-thirds (2/3) of the outstanding capital stock. This becomes relevant if renewal requires changes to the franchisee corporation's purpose, name, or capital structure.

Can a franchisor refuse to renew?

Yes, in general. Where the contract contains no renewal option, or where the franchisee fails to satisfy the stated conditions, the franchisor may decline to renew. Refusal is a commercial decision, but it is not entirely unchecked.

Two limits matter. First, the contract itself: if the agreement promises renewal on satisfaction of conditions and those conditions are met, refusal may be a breach of contract. Second, the general obligation of good faith that attends the performance of every contract. A refusal engineered to seize the franchisee's goodwill or to circumvent a clear renewal right can be challenged.

If the franchise involves registered trademarks, the franchisor's rights under the Intellectual Property Code remain intact regardless of the renewal dispute. The franchisee cannot continue using the marks once the license ends.

Frequently asked questions

Is there a law on franchise renewal in the Philippines? No single franchise renewal law exists. Renewal is governed by the franchise agreement, with the Intellectual Property Code (Republic Act No. 8293) covering the trademark and technology-transfer aspects, and the Revised Corporation Code (Republic Act No. 11232) covering the corporate franchisee.

Can my franchisor refuse to renew my franchise? Generally yes, if the contract does not give you a renewal right or if you fail its conditions. If the contract grants renewal on stated terms and you meet them, a refusal may be a breach of contract.

Do I need to register my franchise agreement with the government? If the agreement is a technology transfer arrangement involving the licensing of intellectual property rights, the Intellectual Property Code tasks the IPO's Documentation, Information and Technology Transfer Bureau with registering such arrangements. Confirm the specific requirements for your agreement.

Practical takeaways

• Renewal rights come from the franchise agreement, not from a stand-alone Philippine franchise statute.
• Missing the contractual notice deadline is one of the most common ways franchisees lose a renewal option.
• Unpaid royalties and other obligations are frequent, legitimate grounds for a franchisor to refuse renewal.
• The Intellectual Property Code governs the trademark license and technology transfer arrangements; the Revised Corporation Code governs the corporate franchisee's SEC filings.
• Continued use of the franchisor's marks after a refused or expired renewal carries infringement risk.

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. 8293 - AN ACT PRESCRIBING THE INTELLECTUAL PROPERTY CODE AND ESTABLISHING THE INTELLECTUAL PROPERTY OFFICE, PROVIDING FOR ITS POWERS AND FUNCTIONS, AND FOR OTHER PURPOSES

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