What’s the difference between a FRANCHISE AGREEMENT and a

PARTNERSHIP AGREEMENT?
Franchise Agreement Partnership Agreement
The franchisor grants to the franchisee Two entities enter into an agreement to
the right to operate a business according operate a business. All the terms for the
to the franchise system and during a operation of the business will be defined
term as determined by the franchisor. by the partnership contract. With the
prinicipal business being designated as
the Manager for a determined period.
The franchisor grants the franchisee the The principal business shall allow the
right to use a mark, or a trade secret, or use of marks, concepts, designs. The
any confidential information or grant is not perpetual.
intellectual property owned by the
franchisor or relating to the franchisor
The franchisor possesses the right to The principal business shall have control
control the administration over the over all major aspects of the business.
franchisee’s business operation during Unlike in a franchise system, where after
the franchise in accordance with the a certain predetermined period of time
franchise system the franchisor shall hand over control to
the franchisee.
The frnachisor is paid with a certain fee. Principal business is paid the following:
1. One time fee at the start of the
partnership
2. Management fee (5%) of the net
income
3. Royalty fee of 5% of the gross income
There are generally no requirements to The Partnership Agreement can require
be met prior to the offer and/or sale of a as mandatory certain fail safe standards
franchise. before the start of the contract (For
example: The intended partner must
show liquidity in assets, location of the
business must have been secured, etc.)
The law does not require the registration The law requires that the Articles of
of franchisors with a professional or Partnership must be registred with the
regulatory body before setting up a SEC.
franchise system. However, Bureau
Order No. 10-24 Series of 2010 (Advisory
on Due Diligence to be Undertaken by a
Prospective Franchisee) advises potential
franchisees to require the franchisor to
obtain a certificate of good standing
from the Securities and Exchange
Commission, and a certificate stating
that the franchisor is a member of any
franchisor association and has no
pending cases against it.
Executive Order No. 169 mandates the
registration of Franchise Agreements
entered with Micro, Small, and Medium
Enterprises (MSME). MSMEs cover
businesses whose total assets range
from less than Fifty Thousand Pesos
(Php 50,000.00) up to Twenty Million
Pesos (Php 20,000,000.00).
As a rule, a franchisee will not
automatically be deemed an agent of the
franchisor, unless stated in the
franchise agreement. To emphasize the
franchisee’s independence from the
franchisor, a franchise agreement can
include a provision stating that the
franchisee is not an employee, business
partner, agent or representative of the
franchisor. It is also recommended that
a provision explicitly prohibiting the
franchisee from holding himself out as
having authority to bind the franchisor
be included in the agreement.
The franchisor and franchisee are free to
contractually stipulate on termination
rights, provided that it is not contrary to
the law, public order, public policy,
morals or good customs.