SEC Adm. Case No. 01-10-111 Fran.con Franchise Marketing and Consultancy, Inc.

Securities and Exchange Commission SEC Bldg., EDSA, Greenhills, Mandaluyong City Republic of the Philippines

In the Matter of

ANd CoNSultANCY, INC. FRAN.CON FRANCHISE MARKETING

SEC Admin Case No. 01-10-111

DEPARTMENT, ENFORCEMENT AND PROSECUTION Petitioner.

DECISIOn

Incorporation of Fran.Con Franchise Marketing & Consultancy Inc. (`Francon'? filed by the Enforcement and Prosecution Department ('EPD") on 20 January 2010. For consideration is the Petition for Revocation of the Certificate of

FACTS OF THE CASE

September 2001 under Company Registration No. A200114324 with the following primary purpose: Francon is a stock corporation registered with the Commission since 2o

provide business program and assist in requirements from in facilitating business to revitalized selling technigues. It pioneers & caters to small and medium franchise company that can assist your businesses of its franchise potential. It will planning to implementation that guaranties results in work with outmost professionalism. " "To provide franchise marketing services in all the support needed

the corporation can do or is doing to the great prejudice of or damage to the general Certificate of Incorporation on the ground of "[s]erious misrepresentation as to what On 20 January 2010, EPD filed a Petition for Revocation of Francon's

In the Matter of Fran.Con Franchise Marketing and Consultancy, Inc. SEC Admin Case No. 01-10-111 Page 2 of 5

public."1 EPD alleges that Francon has been "acting as a franchisor" although its primary purpose is only to provide franchise marketing services to franchisees.

Francon, all of which are describing a similar modus operandi by which Francon lures its victims into paying franchise fees. Attached to EPD's Petition are several complaints by the alleged victims of

that delaying payment might lead to a p client, through advertising or "sales taik", to franchise from it a food stall or food cart business with a promise of a guaranteed projected income, marketing support be encouraged to pay, as soon as possible, ranging from about Php 40,000.00 to abo1 and site assistance, and an assurance that the location of the business will be on a the area where the food stall or food cart popular mall. Second, the client is asked to make a deposit as a reservation fee for The said modus operandi is conducted as follows: first, Francon will entice its Nt Gi I be located: Afterwards, the client will the fuil amount of the franchise fee, 400,000.00, with an admonition of business opportunity. With Francon's persuasion, a client will then Day inchise fee without knowing that once it is already paid in full, Francon sentations it made. default on the promises and repre-

support and no site assistance, the equipment and supplies are not included in the just be ignored. franchise fee contrary to what was promised, and the business is adjacent to another franchisee offering the same product or is not located in a strategic location. Moreover, any complaint or claim for refund of the franchise fee by the clients wili Among the dilemmas faced by the clients are as follows: no marketing

default" pursuant to Section 3-12 of the 2006 Rules of Procedure of the Commission opportunity to present its side, a Summons dated 28 January 2010 was issued and received by Francon on 03 February 2010, directing it to enter its appearance and file its answer within the prescribed -period. However, Francon simply ignored the same and to date, it has not filed an answer. Thus, Francon is considered as "in which reads: Thus, acting on EPD's Petition for Revocation and giving Francon an

fails to answer the complaint within the abovestated period, he shall be considered as in default.: The Hearing Panel or the Hearing Panel or Officer determines that the complainant Officer shall, motu proprio, proceed to render judgment granting the complainant such relief as the complaint may warrant, unless should be"required to submit ex parte additional evidence. (emphasis supplied) "Sec. 3-12. Effect of Failure to Answer. - If the respondent

1 Section 6(I)(2) of Presidential Decree 902-A, as amended.

In the Matter of Fran.Con Franchise Marketing and Consultancy, Inc. SEC Admin Case No. 01-10-111 Page 3 of 5

ISSUE

Francon's Certificate of Incorporation based on EPD's Petition and submitted evidence. The sole issue in the present appeal is whether the Commission shouid revoke

RULING

The answer is in the AFFIRMATIVE

Section 6(I)(2) of Presidential Decree 902-A, as amended, reads:

Commission shali possess the following powers: "Sec. 6. In order to effectively exercise such jurisdiction, the

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partnerships or associations, upon any of the grounds I)To suspend, or revoke, after proper notice and hearing. the franchise or certificate of registration of corporations. provided by law, including the following:

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prejudice of or damage to the general 2. Serious misrepresentation as to what the corporation can do or is doing to the great public;"(emphasis supplied)

creation? and those enumerated in its charter.3' As regards the iatter, the same can allowed _and can legally exercise onty such _powers granted by the law for its be found in the purpose clause of the Articles of Incorporation which confers and limits the powers that a corporation may exercise. Once a corporation has been granted juridical personality by the State, it is

In the present case, the purpose ciause of Francon's Articles of Incorporation

"provide: business program : and assist in requirements from planning to implementation." Its charter does not provide that it can act as a franchisor of a basically states that its primary purpose is to "provide franchise marketing services"

food stall or a food cart business.

4 Id., at 197. 2 CESAR L. VILLANUEVA, PHILIPPINE CORPORATE LAW 20 (2001 ed.). 3Id., at 232.

In the Matter of Fran. Con Franchise Marketing and Consultancy, Inc. SEC Admin Case No. 01-10-111 Page 4 of 5

apparently acted as a franchisor. Numerous contracts5 show that Francon, thru its stall or food cart business as consideration for the payment of a franchise fee. The pertinent provisions of the said contracts, which patently shows that Francon acted as a franchisor, read as follows: Vice-President for Marketing and Finance, Aireen C. Trinio, :entered into franchising agreements with its clients whereby it awarded franchise rights over several food Nonetheless, based on the evidence attached to EPD's Petition, Francon

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parties have agreed to strictly comply with the following terms and NOW. THEREFORE, for and in consideration of the foregoing premises, the conditions, to wit:

The FIRST PARTY hereby awards the Franchise Rights to the SECOND PARTY commencing on the signing thereof. 2. Franchise effective from. signing of this contract. FRANCHISE FEE IS NON- Further, Franchise Fee shall form and part of Business Consultation the establishment and operation of one (1) Franchise outlet. REFUNDABLE. Fee THOUSAND PESOS (PhP) The Franchise Fee shall fo be

XXX XXX xxx" (emphasis supplied)

involvement cannot be disputed considering that several receipts? were issued by and under the name of Francon pursuant to the said agreements. This only means into by the same, Aireen c. Trinio, though in the name of other franchisors. Although Francon's name does not appear in the said agreements, Francon's Moreover, there are other franchise agreements which were also entered

7 :Id., Annexes E, G, H, N and N-1. 6 Id., Annex F -- Contract between Oscar Delicious Squidbalis, represented by Aireen C. Trinio, and 5 EPD's Petition, Annex Q -- Contract with Emmanuel R. Monreal. Annex I -- Contract between Oscar Delicious Squidballs, represented by Aireen C. Trinio, and Annex O -- Contract between Dahon Saging Foods, represented by Aireen C. Trinio and Vladimir Annex Q-4 -- Contract with Ma. Socorro and Benilda Laboc. and Roselle Yumang. Annex Q-1 -- Contract with Zaidy and Ethelyn Sabiayan. Annex Q-3 -- Contract with Rea A. Landicho. Annex Q-7 -- Contract with Benhur and Julie Nadulpit. Annex Q-2 -- Contract with Bienda D. Tabones and Deborah Q. Chua. Annex Q-5 -- Contract with Abigail T. Espinola. Annex Q-6 -- Contract with Zosimo and Nenita Deveza. Annex Q-8. -- Contract with Joey and Janith Nagrampa. Annex Q-9 -- Contract with Gloria Bacud. Cario and Ma. Cristina Irasusta. Luzviminda C. Marelino

SEC Admin Case No. 01-10-111 Page 5 of 5 In the Matter of Fran. Coni Franchise Marketing and Consultancy, Inc.

that Francon is also using conduits to hide the faci that it is engaging in franchising activities.

indeed performed acts in excess of its primary purpose. Furthermore, considering the nature of Francon's misrepresentation and the number of clients who were misled, the same amounts to serious misrepresentation to the great prejudice of or damage to the general public . Hence, the foregoing pieces of evidence undoubtedly prove that Francon

Monitoring Department be furnished with a copy of this Decision for its appropriate of Presidential Decree 902-A, as. amended. Let the Company Registration and GRANTED. The Certificate of Incorporation of Fran.Con Franchise Marketing & Consultancy Inc. is hereby REVOKED on the ground provided under Section 6(I)(2) action. WHEREFORE, premises considered, the instant Petition is hereby

SO ORdERED.

Mandaluyong City, 13 May 2010.

FE B. BArIN 2R.b

Chairperson

MA. JUANITA E: Gt RAUL J. PALABRICA

Commissione Commissioner

U Manuel huberto B. gaite EVADIOM JA

Commissioner Commissioner