The Power of Collective Bargaining for Franchisees

The dream of owning a franchise is a potent one in the Philippines. It promises a business-in-a-box, a shortcut to entrepreneurship paved with a recognized brand name, a proven system, and the allure of ready-made success. For a nation of natural entrepreneurs, it feels like the perfect fit. The Philippine franchise industry is a behemoth, contributing a substantial 7.8% to the country's GDP and operating with over 1,800 brands. Projections from the Philippine Franchising Association (PFA) see the sector growing by a robust 8% to 10% in 2025.

But beneath this glossy surface of growth lies a fundamental imbalance, a narrative as old as commerce itself: the lone entrepreneur versus the giant corporation. The franchise agreement, often a tome of non-negotiable clauses, typically places the franchisee in a position of significant dependence. They are, in essence, a small business owner tethered to the dictates of a much larger entity that controls the brand, the supply chain, and the rules of the game. When disputes arise—over rising supply costs, mandatory upgrades, or market encroachment—the individual franchisee often finds their voice is but a whisper in a hurricane.

This is where a fascinating, almost counterintuitive comeback story begins to take shape. It’s the resurgence of an old idea, repurposed for a new era of business: collective bargaining. Traditionally confined to the world of labor unions and employee-employer relations, the principles of collective action are now emerging as a powerful, paradigm-shifting tool for franchisees. It’s a move from isolation to solidarity, and it could fundamentally redraw the power map of the Philippine franchise landscape.

The Great Imbalance: A Lone Store Against a System

To understand why collective action is gaining traction, one must first appreciate the structural disadvantages facing a solo franchisee. While you, the franchisee, may have invested your life savings into a single location, the franchisor views the system as a whole. Your individual concerns can easily be dismissed as statistically insignificant against the backdrop of hundreds or thousands of outlets.

This disparity is amplified by the Philippines' legal framework. Unlike other countries, the nation does not have a single, comprehensive "Franchise Law" that specifically governs these relationships. Instead, franchising exists in a gray area, governed primarily by the general principles of contract law found in the Civil Code, alongside intellectual property and competition laws. This lack of a dedicated statute means that the primary document dictating the relationship is the franchise agreement itself—a contract almost always drafted by the franchisor's legal team. While there are legal protections, understanding the full scope of franchisee rights requires careful legal navigation.

In May 2022, a step was taken to address this with Executive Order No. 169, which aims to protect Micro, Small, and Medium Enterprise (MSME) franchisees. The order mandates greater transparency, requiring full disclosure of fees and the inclusion of mechanisms for dispute resolution, including voluntary mediation. It was a clear acknowledgment from the government that the playing field needed leveling. Yet, an executive order is not a law, and its implementation and impact are still unfolding. The fundamental power dynamic remains largely unchanged.

What “Collective Bargaining” Means for Business Owners

When we hear "collective bargaining," the mind immediately goes to the Labor Code of the Philippines. It defines a formal process where a registered labor union negotiates with an employer over wages, hours, and working conditions. It's crucial to be clear: franchisees are not employees. They are independent business owners. They cannot form a labor union in the traditional sense.

The conceptual leap is to adapt the principle of collective action, not the legal definition. For franchisees, this means forming an independent association—a unified group of business owners operating under the same brand—to negotiate with their common business partner, the franchisor. Their goal isn't to negotiate salaries; it's to negotiate the core business terms that affect the profitability and sustainability of every single franchisee in the system. It’s a shift from a one-to-many to a many-to-one conversation. This is less about labor rights and more about leveraging commercial power through unity.

The Pressure Points: Where Unity Creates Leverage

An individual franchisee complaining about the high cost of approved sauces is a nuisance. An association representing 300 franchisees presenting a data-backed proposal for an alternative supplier is a business proposition. The power of a franchisee collective becomes clearest when you look at the specific, recurring pain points in the franchise relationship.

• Mandatory Supply Chains and Inflated Costs: This is perhaps the most common grievance. Franchisors mandate that franchisees purchase supplies, from packaging to raw ingredients, exclusively from an "approved" list of suppliers. While this ensures brand consistency, these suppliers are often more expensive than what's available on the open market, and in some cases, the franchisor may receive rebates from these suppliers—a cost indirectly shouldered by the franchisee. A collective body can conduct its own market research, identify alternative local suppliers that meet quality standards, and negotiate for their inclusion. More powerfully, they can demand audits to ensure that the approved supplier pricing is competitive and not artificially inflated.
• The Mystery of the Marketing Fund: Franchisees are typically required to pay a percentage of their gross sales into a national advertising and promotions fund. A lone franchisee in Cebu has little say or visibility into how this massive, pooled fund—managed from a head office in Manila—is being spent. They may see national TV campaigns that have little impact on their local foot traffic. A franchisee association can demand transparency and accountability. They can push for a portion of the fund to be allocated to regional or local marketing initiatives, giving franchisees more control over advertising that directly benefits their specific market.
• Unilateral System-Wide Changes: A franchisor can decide to implement a system-wide renovation, a costly new Point-of-Sale (POS) system, or a mandatory equipment upgrade. For a single franchisee, this is a top-down directive that can strain their cash flow with little immediate return. A united association can enter into a dialogue with the franchisor before these changes are finalized. They can negotiate franchise terms that are more favorable, such as a longer rollout period, cost-sharing arrangements, or proving the return on investment of the new system with pilot programs.
• Territorial Rights and Encroachment: One of the biggest fears for a franchisee is "encroachment"—the franchisor opening a new branch (either company-owned or another franchise) so close to an existing one that it cannibalizes sales. Franchise agreements can have vague or weak territorial protections. An association can collectively lobby for clearer, more defined, and more protective exclusive territories to be written into all future and renewing franchise agreements.
• Resolving Disputes and Unfair Termination: When a serious conflict arises, a franchisee is faced with a stark choice: accept the franchisor's position or engage in costly litigation. When facing contract non-renewal or termination, they stand alone. A strong association can change this dynamic. It can provide a support network, pool resources to retain legal counsel for members facing unfair treatment, and act as a powerful voice in mediation. The prospect of dealing with a formal dispute from a unified group, rather than an isolated individual, encourages franchisors to  handle franchisee disputes with greater care and fairness.

The Blueprint for Action: Organizing for Influence

So how does this work in the Philippine setting? It begins with franchisees of the same brand breaking their isolation and simply talking to one another.

The first step is often the informal creation of a network—a Viber group, a private Facebook page—where owners can share information on sales trends, operational challenges, and supplier issues. This evolves into the formation of a more formal, independent franchisee association with elected officers, bylaws, and a clear mandate.

Within many franchise systems, there exists a formal communication channel known as a Franchise Advisory Council (FAC). These councils are intended to be a bridge between the franchisees and the franchisor. However, a common criticism is that FAC members can be hand-picked by the franchisor, potentially leading to a body that is more compliant than representative. A strong, independent franchisee association can work in tandem with the FAC, either by ensuring their elected leaders get seats on the council or by acting as a powerful external body that the FAC cannot ignore. Having an organized group to feed issues to the franchise advisory council makes the entire process more effective and democratic.

The leverage of these associations comes not from a legal right to "bargain" in the labor sense, but from the clear business implications of their unity. A franchisor is far less likely to ignore a proposal or a grievance when it comes from an organized group that represents a significant portion of its royalty and fee-paying network.

The Filipino Advantage: Bayanihan and Institutional Channels

The push for franchisee collective action in the Philippines has a unique cultural advantage: the spirit of bayanihan. The concept of a community coming together to achieve a common goal is a deeply ingrained cultural value. Framing a franchisee association not as an adversarial body, but as a community working to improve the health and profitability of the entire brand, resonates powerfully in the local context.

Institutionally, while the path is not always clear-cut, there are avenues for support. The Philippine Franchise Association (PFA) is the country's premier industry body. It's important to note that the PFA's membership includes both franchisors and franchisees, so its role is often that of a mediator promoting ethical practices, rather than a zealous advocate for one side. Nonetheless, understanding the  role of the Philippine Franchise Association is crucial, as it provides a vital platform for industry-wide dialogue and sets the ethical tone for the sector.

For more serious issues, organized franchisees have potential recourse through government bodies. A complaint about anti-competitive practices, such as mandatory, non-competitive supply arrangements, could potentially be brought before the Philippine Competition Commission (PCC). The Department of Trade and Industry (DTI), tasked with implementing Executive Order 169, is another key institution that franchisees can appeal to for mediation and support.

From Dependence to Interdependence: The Future of Franchising

The rise of franchisee collective bargaining is more than just a trend; it's a maturation of the franchise industry. It signals a move away from a paternalistic, top-down model to a more collaborative and interdependent partnership. For franchisors, a strong, organized franchisee association should not be seen as a threat, but as a valuable asset. It provides a single, organized channel for feedback, helps identify systemic problems early, and fosters a more engaged and motivated network, which ultimately leads to a stronger brand and greater system-wide profitability.

For franchisees, it is a declaration that they are not just operators of a single unit; they are collective stakeholders in a brand they are helping to build every day. By banding together, they reclaim a measure of control over their investment and their future. The power of collective bargaining gives them a seat at the table, transforming their lone whispers into a unified voice that can no longer be ignored. It's the comeback of the small entrepreneur, not through individual struggle, but through the immense and undeniable power of solidarity.