Practical guidance for former franchisees, franchisors, and counsel. This is general information—not legal advice.

The short answer

If your franchise agreement has expired and you did not sign the proposed renewal, you can generally compete—unless (a) a valid post-term covenant in the old agreement still binds you, or (b) your conduct would amount to trademark infringement, unfair competition, or misuse of trade secrets/confidential information.
A non-compete found only in a new contract you never signed is not binding. Consent is essential under Philippine contract law.
Even without a post-term non-compete, you must de-identify, stop using the brand, and respect confidential information.

The details—and the usual traps—are below.

Core legal building blocks

1) Consent and consideration: contracts bind only parties who agree

Under the Civil Code, contracts require consent; obligations generally bind only the parties and their assigns. A non-compete in a draft renewal that you never signed has no effect.
Consideration (cause) matters: a new restraint usually needs fresh consideration (e.g., renewal rights, compensation), especially if imposed after the original term.

2) Freedom to contract vs. public policy: reasonableness rule

Philippine courts generally enforce reasonable restraints of trade but strike down overbroad ones as contrary to public policy.
Reasonableness typically turns on:
- Time (shorter is safer; 1–2 years is common and more defensible than 5+).
- Territory (should match the franchise’s real market footprint, not “worldwide” unless justified).
- Scope of activity (should target directly competing goods/services, not every business under the sun).
- Protectable interests (brand goodwill, trade secrets, know-how, franchise system).
- Balance of hardships (does the restraint go further than necessary to protect the franchisor?).

3) Post-term non-compete vs. confidentiality

Post-term non-compete: If your expired franchise agreement contains a post-termination/expiry non-compete (often 6–24 months within a defined radius), you may still be bound even after expiry, provided it’s reasonable and supported by consideration from the original grant.
Confidentiality/NDA: Survival clauses for confidentiality often continue after expiry (e.g., 2–5 years or indefinitely for trade secrets). These are more readily enforced than broad non-competes.

4) Trademarks, trade dress, and de-identification

When a franchise ends, all trademark licenses end. Continuing to use the brand, logos, color schemes, menu boards, uniforms, domain names, or confusingly similar “look and feel” risks trademark infringement and unfair competition under the Intellectual Property Code.
De-branding is mandatory: remove branding promptly, change signage, dispose of branded packaging, and update online listings and social pages.

5) Trade secrets and system know-how

The franchise system’s operations manuals, recipes/formulas, supplier pricing, marketing plans, loyalty data, and similar materials are typically confidential. Using or disclosing them after expiry can trigger damages or injunctions, even if there’s no non-compete, through contractual confidentiality duties, civil wrongs (abuse of rights), or unfair competition doctrines.

6) Philippine Competition Act (PCA) overlay

Vertical restraints (like non-competes) ancillary to a legitimate transaction (a real franchise) are usually assessed under a rule-of-reason approach—are they necessary and proportionate to protect know-how and brand?
A stand-alone non-compete with no ongoing franchise and no proportionate justification is more vulnerable to challenge as an unreasonable restraint—especially if it locks you out of a market where the franchisor no longer deals with you.

What changes when the franchise expires?

Scenario A — The old agreement has no surviving non-compete

You may compete, provided you:
- De-brand completely (no mark, no confusingly similar get-up).
- Do not use confidential materials or pass off your business as the former franchise.
- Avoid misleading advertising (“formerly X franchise” can still mislead).

Scenario B — The old agreement has a surviving non-compete

You must evaluate enforceability:
- Is the duration, territory, and scope reasonable?
- Does it genuinely protect legitimate interests (e.g., local market goodwill, specific know-how) without overreaching?
- Was it supported by consideration (the original franchise grant typically suffices)?
If yes, competing within the restricted scope/time/territory can be enjoined and damages may be claimed.
If it’s overbroad or punitive, you can challenge it; courts can deny an injunction, narrow the restraint, or declare it void.

Scenario C — Franchisor unilaterally adds a non-compete in a new contract you never signed

Not binding. Without your consent, there’s no contract. The franchisor may refuse to renew, but it cannot impose new restraints that never existed.

Practical risks if you open a competing business

Trademark and trade dress Continuing brand signals (colors, store layout, menu names) may confuse customers and prompt infringement/unfair competition claims.
Misuse of confidential information Using the operations manual, recipes, proprietary training, or supplier terms can ground claims for injunctions and damages.
Customer and staff solicitation If the old agreement has surviving non-solicit clauses, violating them risks liability. Even without such clauses, misappropriating customer lists or inducing breach of contract can be actionable.
Supply-chain entanglements Some suppliers are tied to the franchisor’s IP or contracts. Do not use supplier accounts branded or negotiated by the franchisor unless permitted.

How courts typically analyze non-competes in franchising

Courts in the Philippines evaluate reasonableness in light of the franchise’s legitimate interests:

Legitimate interest: protecting brand goodwill, proprietary know-how, and system uniformity accumulated at franchisor’s expense.
Necessity: Would a narrower restraint (shorter period, smaller radius, limited product categories) adequately protect those interests?
Public interest: Does the restraint unduly restrict competition or customer choice in the locality?
Bargaining context: Was there consideration and fairness in imposing the restraint?

Key takeaway: A tight, tailored post-term restraint (e.g., 12–24 months, the store’s trade area, only the same format) is more enforceable than a sweeping “no food business anywhere for five years” clause.

Renewal and “holdover” pitfalls

Silent holdover: If you continued operating after expiry with the franchisor’s knowledge, check communications and conduct—a tacit month-to-month arrangement may be inferred on the same terms, including any non-compete that survives termination or expiry.
Cure/notice clauses: Many agreements require notice before termination. If termination was improper, disputes may focus on whether the contract actually ended, which affects whether post-term restraints have kicked in.
De-identification deadlines: Missed deadlines to remove branding strengthen infringement claims.

Competition-law lens on post-term non-competes

Under the PCA, ancillary non-competes can be acceptable if:

Limited in time and space;
Narrowly tailored to protect transferred/supplied know-how; and
Do not foreclose a substantial part of the market.

A stand-alone restraint with no ongoing vertical relationship (because you declined the new contract) is harder to justify—especially if it impedes entry or keeps prices high in a local market.

Step-by-step decision guide for a former franchisee

Locate and read the old agreement
- Look for post-termination/expiry clauses: non-compete, non-solicit, confidentiality, de-identification, return of manuals, IP.
- Note survival language and durations/radii.
Inventory what you plan to do
- Business model and menu/catalog: avoid clones that rely on protected know-how.
- Branding: create distinctive marks, trade dress, and names.
- Location: if a radius restriction exists, consider a site outside it for the restricted period.
Sanitize operations
- Return/destroy manuals and confidential materials; document it.
- Rebuild SOPs from public domain/independent development; keep version histories to prove independence.
- Create new supplier accounts and new recipes/processes where possible.
Communications
- Don’t imply affiliation with the old brand.
- Avoid “we’re the same as [Old Brand]” claims.
If threatened with suit/injunction
- Injunction standard: the franchisor must show a clear legal right and urgent necessity to prevent serious, irreparable injury.
- Defenses include no contract/no consent, no survival, overbreadth, lack of protectable interest, independent development, and clean de-branding.

For franchisors: drafting to withstand scrutiny

Make post-term restraints specific: e.g., 12–24 months, 5–10 km from the outlet, same format and product category.
Include survival clauses (confidentiality, de-branding, non-solicit).
Tie non-compete to protectable interests (manuals, training, local goodwill).
Provide consideration at renewal if adding or widening restraints.
Spell out de-branding steps and timelines; require return/destruction certificates.

Frequently asked questions

1) The franchisor emailed a new non-compete after expiry. I didn’t sign. Am I restrained? No. Unsigned terms do not bind you. You remain bound only by surviving provisions of the expired agreement (if any) and by general laws (IP, unfair competition, confidentiality).

2) The old contract has a 3-year, nationwide non-compete. Enforceable? Vulnerable. Three years nationwide is often overbroad unless the franchisor shows strong justification. Courts tend to narrow or invalidate excessive restraints.

3) Can I hire my old staff? Check for a surviving non-solicit. Absent one, do not induce breach of active contracts or use confidential employee lists. Hiring must be voluntary and clean.

4) Can I serve similar products if I created my own recipes? Generally yes—if independently developed and no confidential materials or trademarks are used, and there’s no valid surviving restraint.

5) Can the franchisor block me under the PCA? Competition law typically scrutinizes overbroad restraints; it doesn’t give franchisors added leverage to bar competition after the relationship ends, absent a reasonable ancillary restraint.

Document checklist (for former franchisees)

☐ Final, signed franchise agreement (all amendments)
☐ Evidence of expiry/termination date and compliance with de-branding
☐ Any survival clauses (non-compete, NDA, non-solicit) and durations/territories
☐ Proof of return/destruction of manuals and confidential data
☐ Records showing independent development of SOPs/recipes/branding
☐ New brand clearance (distinct name/logo; basic trademark search)
☐ Lease and business permits for the new venture (preferably outside any restricted radius)

Bottom line

A non-compete that exists only in a new, unsigned contract does not bind you.
Your ability to compete turns on: (1) the old contract’s surviving restraints and their reasonableness; (2) strict avoidance of the former brand and trade dress; and (3) respect for confidential information.
If a dispute looms, move quickly to document de-branding and independent development, and seek counsel to assess the strength of any surviving restraint and potential defenses.

If you want, I can turn this into a one-page checklist or a letter template responding to a franchisor’s cease-and-desist.