Franchise Due Diligence Checklist for Philippine Buyers

Due diligence is the unglamorous work that protects Filipino SME capital from charming presentations. This checklist is designed to be used with a notebook or spreadsheet. Tick items only when you have evidence—not when you have a good feeling.

If you spot multiple pressure tactics while working through this list, cross-check our guide to franchise scam red flags.

How to use this checklist

• Work top to bottom; do not skip to fit-out quotes early.
• Keep emails and proposals in one folder per brand.
• Assign a “red / amber / green” status per section.
• Involve a lawyer before large deposits; this list does not replace counsel.
• Stop the process if the seller blocks basic verification.

1) Self and capital readiness

• [ ] Written maximum total investment (all-in)
• [ ] Written minimum cash reserve after opening (months of burn)
• [ ] Clear owner time commitment (hours/week in year one)
• [ ] Decision-makers aligned (spouse/partners/co-investors)
• [ ] Debt plan stress-tested if borrowing

If this section is amber, pause brand shopping. A great franchise on thin capital is still fragile.

2) Brand and track record

• [ ] Legal entity name verified; matching contracts and receipts
• [ ] Trademark ownership or license path explained in writing
• [ ] Years operating company stores and franchised stores stated separately
• [ ] Outlet count with addresses you can visit
• [ ] Openings and closures in the last 24 months disclosed
• [ ] Management team identities are real people you can research

Visit the Franchise Philippines hub for orientation, then verify every claim offline.

3) Offer economics

• [ ] Initial fee inclusions listed line by line
• [ ] Exclusions priced (equipment, POS, initial inventory, freight)
• [ ] Royalty / continuing fee formula understood with examples
• [ ] Marketing fund rules and reporting explained
• [ ] Supplier pricing samples obtained for key SKUs
• [ ] Working capital guidance compared with your own model

Use understanding franchise fees to sanity-check incomplete packages.

4) Legal and contract review

• [ ] Full draft franchise agreement received (not summary only)
• [ ] Term, renewal, and transfer conditions read
• [ ] Territory / exclusivity and online channel rules clarified
• [ ] Default, cure periods, and termination effects explained by counsel
• [ ] Non-compete scope reasonable for your career risk
• [ ] Dispute resolution venue and process understood

Do not sign under event-day excitement. Contracts outlive balloons.

5) Operations and support

• [ ] Training length, location, and who pays travel documented
• [ ] Opening support days on-site specified
• [ ] Field support frequency after month three described
• [ ] Ops manual access rules clear
• [ ] Escalation contact for stockouts and equipment failure named
• [ ] Required tech stack and its monthly cost listed

Ask what happens when the brand is busy launching elsewhere—support should not vanish after your fee clears.

6) Franchisee reference calls

Aim for at least three franchisees, including one outside the seller’s highlight list.

Questions to ask:

1. What costs surprised you in the first six months?
2. How responsive is support during stockouts?
3. Would you buy again at today’s fees?
4. How accurate were the early sales expectations?
5. What would you check more carefully?

• [ ] Notes stored with dates and names
• [ ] Patterns across calls identified (not one glowing outlier)

7) Site and channel validation

• [ ] Customer journey paragraph written for your concept
• [ ] Multi-daypart traffic counts completed
• [ ] Occupancy cost modeled with add-ons
• [ ] Landlord rules checked against brand rules
• [ ] Delivery economics modeled if relevant
• [ ] Brand site approval process and timeline understood

Follow the fieldwork habits in selecting a franchise location.

8) People and compliance at your unit

• [ ] Staffing plan by daypart with wage assumptions
• [ ] Permit path listed (barangay, mayor’s permit, FDA-related needs if food, etc.)
• [ ] Food safety / service training responsibilities allocated
• [ ] Insurance expectations clarified
• [ ] Data and customer info handling considered if apps are used

For general business regulation references, use primary sources such as the Department of Trade and Industry rather than forwarded screenshots.

9) Exit and downside planning

• [ ] Resale / assignment conditions understood
• [ ] What you keep if trademarks must be removed
• [ ] Worst-case monthly cash need documented
• [ ] Personal guarantee exposure known if any

Optimism is fine. A downside plan is mandatory.

10) Final go / no-go gate

Proceed only if:

1. Capital and time sections are green
2. Contract risks are accepted with counsel’s notes, not ignored
3. Franchisee calls broadly corroborate the sales story
4. Site math works at conservative volume
5. No unresolved scam-pattern behaviors remain

If any of those fail, “no” or “not yet” is a successful diligence outcome.

A one-page weekly rhythm

Monday: Document requests
Wednesday: Site or outlet visits
Friday: Reference calls and model updates
Weekend: Family alignment and cool-off

Repeat for each shortlisted brand. Speed is not a virtue when six figures of family capital are on the line.

Closing

This checklist turns franchising from a vibe into a file of evidence. Use it until boredom sets in—that boredom is often where safety lives. When you need conceptual refreshers between calls, skim the blog and return to the next unchecked box with a clear head.