8 
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
-a 
s. No. 
INTRODUCED BY HON. MANUEL B. VELAR, JR. 
EXPLANATORY NOTE 
The Constitution, Article 2, Section 20 provides: 
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Section 20. The State recognizes the indispenst.- le role' o the private 
sector, encourages private enterprise, and provides incentives to needed 
investments. 
Franchise businesses represent a large and growing segment of the country's retail and 
service businesses and are rapidly replacing more traditional forms of small business ownership 
in our economy. 
Franchise businesses involve a joint enterprise between the franchisor and franchisees, 
in which each party has a vested interest in the franchised business. Most prospective 
franchisees lack bargaining power and generally invest substantial amounts to obtain a franchise 
business when they are unfamiliar with operating a business, with the business being 
franchised, and with industry practices in franchising. 
Many franchises reflect a profound imbalance of contractual power in favor of the 
franchisor, and fail to give due regard to the legitimate business interests of the franchisee, as a 
result of the franchisor reserving pervasive contractual rights over the franchise relationship. 
Franchisees may suffer substantial financial losses when the franchisor does not provide 
truthful or complete information regarding the franchise opportunity, or where the franchisor 
does not act in good faith in the performance of the franchise agreement. 
Existing laws have not evolved sufficiently to protect franchisees adequately from 
fraudulent or unfair practices in the sale and operation of franchise businesses, and significant 
contractual and procedural restrictions have denied franchisees adequate legal recourse to 
protect their interests in such businesses. 
A franchisee's freedom to contract is greatly limited by the disparity of bargaining 
power, lack of consistent legal standards, and other factors described above. This bill is 
necessary to restore freedom to contract, and to remove restrictive barriers impeding entry into 
industries and markets dominated by franchise systems. 


THIRTEENTH CONGRESS OF THE 
“Obk JiJN 30 P6 11 ’1 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
SENATE 
S. No. 
INTRODUCED BY HON. MANUEL B. VTLLAR, JR. 
AN ACT ESTABLISHING MINIMUM STANDARDS OF FAIR CONDUCT IN 
FRANCHISE SALES AND FRANCHISE BUSINESS RELATIONSHIPS 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Short Title. This Act shall be known as the ‘‘Small Business Franchise Act.” 
SECTION 2. Purpose. The purpose of this Act is to promote fair and equitable franchise 
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agreements, to establish uniform standards of conduct in franchise relationships and to create 
uniform private remedies for violations of pertinent laws. 
SECTION 3. Definitions. For purposes of this Act: 
(1) The term “good faith” means honesty in fact and the observance of reasonable standards 
of fair dealing in the trade. 
(2) The terms “material” and “material fact” includes: 
(A) any fact, circumstance, or set of conditions which a reasonable franchisee or a 
reasonable prospective franchisee would consider important in making a 
significant decision relating to entering into, remaining in9 or abandoning a 
franchise relationship; and 
(B) any fact, circumstance, or set of conditions which has, or may have any 
significant financial impact on a franchisor, franchisee or a prospective 
franchisee. 
(3) The term “offer” or “offering” means any effort to offer or dispose of, or solicitation of 
an offer to buy, a franchise or interest in a franchise for value. 


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(4) The term “outlet” means a point of sale, temporary or permanent, fixed or mobile, from 
which goods or services are offered for sale. 
(5) The term “person” means an individual or any other legal or commercial entity. 
(6) The term “s~bfranchise’~ 
means a contract or an agreement by which a person pays a 
franchisor for the right to sell, negotiate the sale, or provide service franchises. 
(7) The term “ subfranchisor” means a person who is granted a subfranchise. 
(8) The term “trade secret” means information, including a formula, pattern, compilation, 
program, device, method, technique, or process that: 
(A) derives independent economic value, actual or potential, from not being 
generally known to, and not being readily ascertainable by proper means by, 
other persons who can obtain economic value from its disclosure or use; and 
(B) is the subject of efforts that are reasonable under the circumstances to maintain 
its secrecy. 
SECTION 4. Franchise Sales Practices. 
(a) IN GENERAL - In connection with the advertising, offering, sale or promotion of nay 
franchise, it shall be unlawful for any person: 
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(1) to employ a device, scheme, or artifice to defraud; 
(2) to engage in an act, practice, course of business or pattern on conduct which 
operates or is intended to operate as a fraud upon prospective franchisee; 
(3) to obtain property, or assist others to obtain property, by making an untrue 
statement of a material fact or any failure to state a material fact; 
(4) to discriminate among prospective franchisees on the basis of race, color, sexual 
orientation, sex, religion, disability, national origin, or age- 
(A) in the solicitation, offering or sale of any franchise opportunity; or 
(B) in the selection of any site or location for a franchise business. 
(b) MISWRESENTATION IN REQUlRED DISCLOSURE - In connection with any 
disclosure document, notice, or report required by any law, it shall be unlawful for any 


franchisor, subfranchisor, or franchise broker, either directly or indirectly through another 
person 
(i) 
(ii) 
(iii) 
to make an untrue statement of materia1 fact; 
to fail to state a material fact; or 
to fail to state any fact which would render any required statement or 
disclosure either untrue or misleading. 
(B) to fail to furnish any prospective franchisee with- 
(iv) 
all information required to be disclosed by law and at the time and in 
the manner required; and 
a written statement specifjmg prominently whether the franchise 
agreement involved contains a right to renew such agreement; or 
(v) 
(C) to make any claim or representation to a prospective franchisee whether orally or 
in writing, which is inconsistent with or contradicts such disclosure document. 
SECTION 5. Unfair Franchise Practices. 
(a) DECEPTIVE AND DISCRIMINATORY PRACTICES 
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In connection with the 
performance, enforcement, renewal, or termination of any franchise agreement, it shall 
be unlawfil for a franchisor or subfranchisor, either directly or indirectly through another 
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(1) to engage in an aci, practice, course of business, pattern of conduct which 
operates as a fraud ubon any person; 
(2) to discriminate among franchisees on the basis of sexual orientation, rex, religion, 
disability, national origin, or age; 
(3) to hinder, prohibit, or penalize (or threaten to hinder, prohibit, or penalize), 
directly or indirectly, the free association of franchisees for any lawful purpose, 
including the formation of or participation in any trade association made up of 
franchisees or of associations of franchises; or 


(4) to discriminate against a franchisee by imposing requirements not imposed on 
other similarly situated Eranchisees or otherwise retaliate, directly or indirectly, 
against any franchise for membership or participation in a franchisee association. 
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(c) TERMINATION WITHOUT GOOD CAUSE 
(1) It shall be unlawful for a franchisor, either directly or indirectly through an 
affiliate or another person, to terminate a franchise agreement prior to its 
expiration without good cause for such termination. 
(2) For purposes of this subsection, good cause shall exist only where- 
(A)(i) the franchisee fails to comply with a material provision of the franchise 
agreement after receiving notice that specifies the precise basis for the default, each 
material term of the franchise agreement with which the franchise is not in 
compliance, and a 30-day period to cure the default; and 
(ii) if the nature if the default is such that it cannot be cured through 
reasonably diligent conduct, the franchisee fails to initiate within 30 days, and 
diligently pursue substantial continuing action to cure the default; 
(B) the franchise, without the requirement of notice and opportunity to cure- 
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(ii) 
(iii) 
voluntarily abandons the business licensed by the franchise 
agreement, except that loss or termination of a leasehold for the 
business prior to the term of a franchise agreement by reason of 
eminent domain, foreclosure sale, natural disaster or other 
termination not the fault of the franchisee shall not be considered 
abandonment by the franchisee; 
is convicted of a felony, for which imprisonment of 1 year or more 
can be imposed, which substantially impairs the good will associated 
with the franchisor’s trade mark, service mark, trade name, logotype, 
advertising, or other commercial symbol; 
is repeatedly in default of the same material provision of the 
franchise agreement, where the enforcement of such provision is 
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substantially similar to enforcement of that provision with other 
franchisees; or 
operates the business licensed by the franchise agreement in a 
(iv) 
manner that creates an imminent danger to public health or safety; or 
(C) the franchisor withdraws from the marketing area of the business licensed by the 
franchise agreement and pays the franchisee reasonable compensation for 
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damages incurred from the shortened term of the agreement and agrees in writing 
not to enforce any contractual prohibition against the franchisee continuing to 
engage in the business at the franchised location. 
(c) POST-TERM RESTRICTIONS ON COMPETITION. 
(1) A franchisor shall not prohibit, or enforce a prohibition against, any a franchisee 
from engaging in any business at any location after expiration of a franchise 
agreement. 
(2) Nothing in this subsection shall be interpreted to prohibit enforcement of any 
provision of a franchise contract obligating a franchisee after expiration or 
termination of a franchise: 
(A) to cease or refrain from using a trademark, trade secret, or other 
intellectual property owned by the franchisor or its affiliate, except that 
the existence of language in the franchise agreement purporting to 
determine ownership of a trademark, trade secret, or other intellectual 
property shall not be binding upon any court or forum for purposes of 
this paragraph, but maybe considered by such court or forum as 
evidence of such ownership; 
(B) to alter the appearance of the business premises so that it. is .not 
substantially similar to ,the standard design, dCcor criteria, or motif in 
use by other franchisees using the same name or trademarks within the 
proximate trade or market area of the business; or 


(C) to modify the manner or mode of business operations so as to avoid any 
substantial confusion with the manner or mode of operations which are 
unique to the franchisor and commonly in practice by other franchisees 
using the same name or trademarks within the proximate trade or 
market area of the business. 
SECTION 6. Standards of Conduct. 
(a) DUTY OF GOOD FAITH 
(1) A franchise contract imposes on each party thereto a duty to act in good fa'ith in its 
performance and enforcement. 
(2) As used in this subsection, a duty of good faith shall- 
(A) obligate a party to a franchise to do nothing that will have the effect of destroying or 
injuring the right of the other party to obtain and receive the expected h i t s  of the 
contract and to do everything requires under the contract to accomplish such purpose; 
and 
(B) require honesty of fact and observe of reasonable standards of fair dealing in the 
trade. 
(3) No provision of any franchise agreement, express or implied, shall be interpreted or 
enforced in such a way as to obfuscate a party's duty to act reasonably and in good faith 
with the other, or otherwise allow a disparate result in the franchise relationship. 
(b) DUTY TO DUE CARE 
(1) A franchise agreement imposes on the franchisor a duty of due care, Unless a franchisor 
represents that it has greater skill of knowledge in its undertaking with its franchisees, or 
conspicuously disclaims that it has skill or knowledge, the franchisor is required to 
exercise the skill and knowledge normally possessed by the franchisors in good standing 
in the same or similar types of business. 
(2) For purposes of this subsection- 
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(A) the term “skill or knowledge” means something more than the mere minimum level 
of skill or knowledge required of any person engaging in a service or business and 
involves a special level of expertise- 
(i) which is the result of acquired learning and aptitude developed by 
special training and experience in the business to be licensed under the 
franchise agreement, or the result of extensive use and experience with 
the goods or services or the operating system of such business; 
(ii) which is the result of experience in organizing a franchise system and in 
providing training, assistance and services to franchisees; and 
(iii) which a prospective franchisee would expect in reasonable reliance on 
the written and oral commitments and representations of the franchisor; 
and 
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(B) a franchisor shall be permitted to show that it contracted for, hired or purchased the expertise necessary 
to comply with the requirements of this subsection and that such expertise was incorporated in the 
franchise or communicated or provided to the franchise. 
(3) The requirement of this subsection may not be waived by agreement or by conduct, but 
the franchisor may limit in writing the nature and scope of its skills and knowledge, and 
of its undertaking with a prospective franchise, provided that no inconsistent 
representation, whether written or oral, is made to the prospective franchisee irrespective 
of any merger or integration clause in the franchise agreement. 
(c) LIMITED FIDUCIARY DUTY 
(1) Without regard to whether a fiduciary duty is imposed generally on the franchisor by virtue 
of a franchise agreement, the franchisor owes a fiduciary duty to its franchisees and is 
obligated to exercise the highest standard of care for franchisee interests where the 
franc hi sor- 
(A) undertakes to perform bookkeeping, collection, payroll, or accounting services on behalf 
of the franchisee; or 


(B) administers, controls or supervises (either directly o through any subsidiary or affiliate) 
any advertising, marketing, or promotional fund or program to which franchisees are 
required to, or routinely, contribute. 
(2) A franchisor that administers or supervises the administration of any fund or program described in paragraph 
(l)(B) shall-- 
(A) keep all money contributed to such fund or program in a separate account; 
(B) provide an independent certified audit of such fund within 60 days following the 
close of the franchisor’s fiscal year, which include full disclosure of all fees, 
expenses, or other payments form the account to the franchisor or to any subsidiary, 
affiliate, or other entity controlled in whole or in part by the franchisor; and 
(C) disclose the source and amount of, and deliver to such fund or program, any 
discount, rebate, compensation, or payment of any kind from any person or entity 
with whom such fund or program transacts. 
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(3) While not limiting the ability of any court to identify other circumstances for which a fiduciary duty may also 
exist, this subsection does not create or extend a fiduciary duty by implication to other aspects of a hanchise. 
SECTION 7. Procedural Fairness 
(a) It shall be unlawful for any franchisor, either directly or indirectly through another person to: 
(1) require any term or condition in a franchise agreement, or in any agreement ancillary or 
collateral to a franchise, which directly or indirectly violates any provision of this Act; 
or 
(2) require a franchisee to assent to any disclaimer, waiver, release, stipulation or other 
provision which would purport: 
(A) to relieve any person from a duty imposed by this Act, except as part of a settlement 
of a bona fide dispute; or 
(B) to protect any person against any liability to which he would otherwise be subject 
under this Act by reason of willful misfeasance, bad faith, or gross negligence in the 
performance of duties, or by reason of reckless disregard of obligations and duties 
under the franchise agreement; or 


(3) require a franchisee to assent to any waiver, release, stipulation, or other provision, 
either as part of any agreement or document relating to the operation of a franchise 
business, in any agreement or document relating to the termination, cancellation, 
forfeiture, repurchase, or resale of a franchise business or as a condition for permitting a 
franchisee to leave the franchise system, which would purport to prevent the franchisee 
from making any oral or written statement relating to the franchise business, to the 
operation of the franchise system or to the franchisee’s experience with the franchise 
business. 
(b) Any condition, stipulation, provision, or term of any franchise agreement, or any agreement 
ancillary or collateral to a franchise, which would purport to waive or restrict any right 
granted under this Act shall be void an unenforceable. 
(c) No stipulation or provision of a franchise agreement, or of an agreement ancillary or 
collateral to a franchise, shall: 
(1) deprive a franchisee of the application and benefits of this Act or of any other relevant 
law; 
(2) deprive a franchisee of the right to commence an action (or, if the franchise provides for 
arbitration, initiate an arbitration) against the franchisor for violation of this Act, or for 
breach of the franchise agreement, or of any agreement or stipulation ancillary or 
collateral to the franchise; 
(d) Compliance with this Act or with an applicable law is not waived, excused, or avoided, and 
evidence of violation of this Act or of such law shall not be excluded, by virtue of an 
integration cIause, any provision of a franchise agreement, or an agreement ancillary or 
collateral to a franchise, the parol evidence rule, or any other rule of evidence purporting to 
exclude consideration of matters outside the franchise agreement. 
SECTION 8. Transfer of a Franchise. 
(a) IN GENERAL - A franchisee may assign an interest in a franchised business or in a 
franchise to a transferee provided the transferee satisfies the reasonable qualifications then 
generally applied by the franchisor in determining whether or not a current franchisee is 


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eligible for renewal. If the franchisor does not renew a significant number if its franchisees, 
then the transferee may be required to satisfy the reasonable conditions generally applied to 
new franchisees. For the purpose of this section, a reasonable current qualification for a new 
franchisee is a qualification based upon a legitimate business reason. If the proposed 
transferee does not meet the reasonable current qualifications of the franchisor, the franchisor 
may refuse to permit the transfer, provided that the refusal of the franchisor to consent to the 
transfer is not arbitrary or capricious and the franchisor states the grounds for its refusal in 
writing to the franchisee. 
(b) NOTICE OF PROPOSED TRANSFER - A franchisee shall give a franchisor not less than 
30 days written notice of a proposed transfer of a transferable interest, and on request shall 
provide in writing the ownership interests of all persons holding or claiming an equitable or 
beneficial interest in the franchise subsequent to the transfer or the franchise, as appropriate. 
(c) CONSENT TO PROPOSED TRANSFER - A transfer by a franchisee is deemed to have 
been approved 30 days after the franchisee submits the request for permission to transfer the 
franchise involved unless, within that time the franchisor refuses to consent the transfer as 
evidenced in writing in accordance with subsection (a). A statement of the grounds for 
refusal to consent to the transfer is privileged against a claim of defamation. 
(d) CONDITIONS OF TRANSFER 
(1) PERMISSIBLE CONDITIONS - A franchisor may require as a condition of a transfer 
that: 
(A) the transferee successfully complete a reasonable training program; 
(B) a reasonable transfer fee be paid to reimburse the franchisor for the franchisor’s 
reasonable and actual expenses directly attributed to the transfer; 
(C) the franchisee pay or make reasonable provision to pay any amount due the 
franchisor or the franchisor’s affiliate; or 
(D) the financial terms of the transfer at the time of the transfer, comply with the 
franchisor’s current financial requirements for franchisees. 


(2) IMPERMISSIBLE CONDITIONS - A franchisor may not condition its consent to a transfer described in 
paragraph (1) on- 
(A) a franchisee’s forgoing existing rights other than those contained in the franchise 
agreement; 
(B) a franchisee’s entering into a release of claims broader in scope than a counterpart 
release of claims offered by the franchisor to the franchisee; or 
(C) requiring the franchisee or transferee to make, or agree to make, capital 
improvements, reinvestments, or purchases in an amount greater than the franchisor 
could have reasonable required under the terms if the franchisee’s existing franchise 
agreement. 
(e) ASSIGNMENT - A franchisee may assign the franchisee’s interest in the franchise for the 
unexpired term of the franchise agreement, and a franchisor shall not require the franchisee 
or the transferee to enter into a franchise agreement that has different material terms or 
financial requirements as a condition of the transfer. 
(f) CONSENT TO PUBLIC OFFERING - A franchisor may not withhold its consent to a 
franchisee’s making a public offering of its securities without good cause if the franchisee, or 
the owner of the franchisee’s interest in the franchise, retains control over more than 25 
percent of the voting power as the franchisee. 
(g) CONSENT TO POOLING INTERESTS, OR TO SALE OR EXCHANGE - A franchisor 
may not withhold its consent to a pooling of interests, to a sale or exchange of assets or 
securities, or to any other business consolidation amongst its existing franchisees, provided 
the constituents are each in material compliance with their respective obligations ‘to the 
franc hi sor . 
(h) NONINTERFERENCE - The following occurrences shall not be considered transfers 
requiring the consent of the franchisor under a franchise agreement, and a franchisor shall not 
impose any fees, payments, or charges in excess of a franchisor’s cost to review the relevant 
matter: 


(1) The succession of ownership or management of a franchise upon the death or disability 
of a franchisee, or of an owner of a franchise, to the surviving spouse, heir, or partner 
active in the management of the franchise unless the successor objectively fails to meet 
within 1 year or the then current reasonable qualifications of the franchisor for 
franc hisees. 
(2) Incorporation of a proprietorship franchisee, provided that the franchisor may require a 
personal guarantee by the franchisee of obligations related to the franchise. 
(3) A transfer within an existing ownership group of a franchise provided that more than 50 
percent of the franchise is held by persons who meet the franchisor’s reasonable current 
qualifications, the franchisor may refuse to authorize the transfer. 
(4) A transfer of less than a controlling interest in the franchise to the franchisee’s spouse or 
child or children, provided that more than 50 percent of the entire franchise is held by 
those who meet the franchisor’s reasonable current qualifications. If less than 50 percent 
of the franchise would be owned by persons who objectively meet the fianchisor7s 
reasonable current qualifications, the franchisor may refuse to authorize the transfer. 
(5) A grant or retention of a security interest in the franchised business or its assets, or an 
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ownership interest in the franchisee, if the security agreement establishes an obligation 
on the part of the secured party enforceable by the franchisor to give the franchisor 
simultaneously with notice to the franchisee, notice of the secured party’s intent to 
foreclose on the collateral, and a reasonable opportunity to redeem the interest of the 
secured party and recover the secured party’s interest in the franchise or franchised 
business by satisfying the secured obligation. 
(6) A franchisor may not exercise any purported right of first refusal or right to purchase 
with regard to any franchise, or interest or assets of a fkanchise, upon the happening of 
any event described in paragraph (5) through (5). 
(i) EFFECT OF CERTAIN COVENANTS 


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(1) IN GENERAL - After the transfer of a transferor’s complete interest in a franchise, a 
franchisor may not enforce against the transferor any covenant of the franchise purporting to 
prohibit the transferor from engaging in any lawful occupation or enterprise. 
(2) EXCEPTION - This subsection shall not limit the franchisor from enforcing a contractual 
covenant against the transferor not to exploit the franchisor’s trade secrets or intellectual 
property rights (including protection of trade dress) except by agreement with the franchisor. 
SECTION 9. Transfer for Franchise by Franchisor. A Franchisor shall not transfer, by sale 
or otherwise, its interest in a franchise unless: 
(1) the franchisor provides, not less than 30 days before the effective date of transfer, notice to 
every franchisee of the intent to transfer the franchisor’s interest in the franchise or 
substantially all of the franchises held by the franchisor; 
(2) such notice is accompanied by a complete description of the business and financial terms of 
the proposed transfer or transfers; and 
(3) upon the transfer, the entity assuming the franchisor’s obligations has the business 
experieqce and financial means to perform all the franchisor’s obligations in the ordinary 
course of the business. 
SECTION 10. Independent Sourcing of Goods and Services. 
(a) IN GENERAL - Except as provided in the subsection (e) a franchisor, either directly.or 
indirectly through any affiliate, officer, employee, agent, representative or attorney, shall not 
prohibit or restrict a franchisee from obtaining equipment, fixtures, supplies, goods, or 
services used in the establishment or operation of the franchised business from sources of the 
franchisee’s choosing, except that such goods or services may be required to meet reasonable 
established uniform system-wide quality standards promulgated or enforced by the 
franchisor. 
(b) APPROVED VENDORS - Without limiting the rights of the fianchisee under subsection 
(a), I the franchisor approves vendors of equipment, fixtures, supplies, goods, or services 
used in the establishment or operation of the franchised business, the franchisor shall 
provide and continuously update an inclusive list of approved vendors and shall promptly and 


objectively evaluate and respond to reasonable requests by franchisees for approval of 
competitive sources of supply. The franchisor shall approve not fewer than 2 vendors for 
each piece of equipment, each fixture, each supply, good, or service. 
(c) BENEFITS - A franchisor, and its affiliates, shall fully disclose whether or not it receives 
any rebates, commissions, payments, or other benefits from vendors as a result of the 
purchase of goods or services by franchisees. All such rebates, commissions, payments, and 
other benefits shall be distributed directly to such franchisees. 
(d) REPORTING - A franchisor shall report not less frequently than annually, using generally 
accepted accounting principles, the amount of revenue and profit it earns from the sale of 
equipment, fixtures, supplies, goods, or services to the franchisees of the franchisor. 
(e) EXCEPTION - Subsection (a) does not apply to reasonable quantities of equipment, 
fixtures, supplies, goods, or services, including display and sample items, that the franchisor 
required the franchisee to obtain from the franchisor or its affiliate, but only if the equipment, 
fixtures, supplies, goods, or services are central to the franchised business an incorporate a 
trade secret, patent, or copyright owned by the franchisor or its affiliate. 
SECTION 11. Encroachment 
(a) IN GENERAL - The franchisor may not place, or license another to place, 1 or more new 
outlets for a franchised business in unreasonable proximity to an established outlet of a 
similar kind of franchised business, if- 
(1) the intent or probable effect of establishing the new outlets is to cause a diminution of 
gross sales by the established outlet of more than 5 percent in the 12 months 
immediately following establishment of the new outlet; and 
(2) the established outlet- 
(A) offers goods or services identified by the same trademark as those offered form the 
new outlet; or 
(B) has premises that are identified by the same trademark as the new outlet. 
(b) EXCEPTION - This section shall not apply with respect to an established outlet if, before a 
new outlet described in subsection (a) opens for business, a franchisor offers in writing to 


each franchisee of the franchisor of an established outlet to pay to the franchisee involved an 
amount equal to 50 percent of the gross sales (net of sales taxes, returns, and allowances) of 
the new outlet for the lSt 24 months of operation of the new outlet if the sales of the 
established outlet decline by more than 5 percent in the 12 months immediately following 
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establishment of the new outlet as a consequence of the opening of the new outlet. 
(c) BURDEN OF PROOF - A frdnchisor shall have the burden of proof to show that, or the 
extent to which, a decline in sales of an established outlet described in subsection (a) 
occurred for reasons other than the opening of the new outlet for goods or services 
concerned- 
(1) if the franchisor makes a written offer under subsection (b); or 
(2) in an action or proceeding brought under section 12. 
SECTION 12. Right of Action 
(a) IN GENERAL - A party to a franchise who is injured by a violation or threatened violation 
of this Act, shall have a right of action for recession and restitution, as well as for all 
damages and injunctive relief, including costs of litigation and reasonable attorney’s feed and 
expert witness fees, against any person found to be liable for such violation. 
(b) LIABILITY - Every person who directly or indirectly controls a person liable under 
subsection (a), every partner in a firm so liable, every principal executive officer or director 
of a corporation so liable, every person occupying a similar status or performing similar 
functions and every employee of a person so liable who materially aids in the act or 
transaction constituting the violation is also liable jointly and severally with and to the same 
extent as such person, unless the person who would otherwise be liable hereunder had no 
knowledge of or reasonable grounds to know the existence of the facts by reason of which 
the liability is alleged to exist. 
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(c) ALTERNATIVE DISPUTE RESOLUTION - Except as otherwise provided in subsection 
(d), nothing contained in this Act shall be construed to limit the right of a franchisor and a 
franchisee to engage in arbitration, mediation, or other nonjudicial resolution of a dispute, 
either in advance of after a dispute arises, provided that the standards and protections applied 


in any binding nonjudicial procedure agreed to by the parties are not less than the 
requirements set forth in this Act. 
(d) STATUTE OF LIMITATIONS - No action may be commended pursuant to this section or 
this Act more than- 
(1) 5 yeslrs after the date on which the violation occurs; 
(2) 3 years after the date on which the violation is discovered or should have been 
discovered through exercise of reasonable diligence. 
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(e) VENUE - A franchisee may commence a civil action, or arbitration proceedings, to enforce 
any provision of this Act within the jurisdiction wherein the applicable fi-anchise business is 
located. 
(0 CUMULATIVE RIGHT - The private rights provided for in this section are in addition to 
and not in lieu of other rights ore remedies created by existing laws. 
SECTION 13. Scope and Applicability. 
(a) PROSPECTIVE APPLICATION - Except as provided in subsection (b), the requirements 
of this Act shall apply to franchise agreements entered into, amended, exchanged, 
transferred, assigned, or renewed after the date of enactment of this Act. 
(b) DELAYED EFFECT - The requirements of section 3 of this Act shall take effect 90 days 
after the date of enactment of this Act and shall apply only to actions, practices, disclosures, 
and statements occurring on or after such date. 
Separability Clause. 
SECTION 14. 
If any provision or part hereof, is held invalid or 
unconstitional, the remainder of the law or the provision not otherwise affected shall remain 
valid and subsisting. 
SECTION 15. Repealing Clause. Any law, presidential decree or issuance, executive order, 
letter of instruction, administrative order, rule or regulation contrary to or inconsistent with the 
provision of this Act is hereby repealed, modified or amended accordingly. 
SECTION 16. Effectivity Clause. This Act shall take effect fifteen (15) days after its 
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publication in at least two (2) newspapers of general circulation. 


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Approved, 
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