Franchise Fee Refund Without a Written Contract (Philippines)

Practical legal explainer for would-be franchisees and franchisors. Philippine context. General information only; not legal advice.

1) The situation in one line

You paid a franchise fee but no written franchise agreement was ever signed (or it was promised but never delivered). Can you get your money back? Often yes—through contract, quasi-contract, consumer/fair trade, and even criminal law pathways—depending on facts, documents, and what (if anything) was actually delivered.

2) Why “no contract” doesn’t end the story

Under the Civil Code, a contract is perfected by consent on the essential terms (cause and object). That can be oral or even implied by acts—but the Statute of Frauds requires certain agreements to be in writing to be enforceable in court (e.g., those not to be performed within a year). Most franchise deals run for several years and include a trademark license, territorial rights, and continuing obligations—so they should be written and signed.

What this means in practice:

If no written agreement ever materialized and the franchisor insists on enforcing multi-year terms or keeping a large fee, courts often look for signed writings or substantial performance.
If the franchisor took your money but never delivered the promised agreement or franchise package, you can pursue restitution (return of what you paid) to prevent unjust enrichment.

3) Legal hooks to demand a refund

Lack of perfected/enforceable contract
- If no meeting of minds on essential terms (fees, territory, duration, brand, support), there’s no valid contract—refund follows under unjust enrichment or solutio indebiti (payment by mistake).
Statute of Frauds (unenforceable if unwritten)
- Multi-year obligations generally need a signed writing to be enforceable against the other party. If the franchisor relies only on oral promises but refuses to sign, you can resist enforcement and reclaim what you paid (especially if no substantial performance occurred).
Failure of consideration / non-delivery
- If the franchise package (manuals, training, site approval, right to use the mark) was not delivered, there’s a total or partial failure of cause—basis for rescission or resolution and restitution.
Vices of consent (fraud, deceit, mistake, intimidation)
- If the fee was induced by false earnings claims, fabricated support, or material concealment (e.g., they don’t actually own the trademark), you may annul the transaction and seek damages in addition to a refund.
Illegality
- If the franchisor’s business is unregistered, uses a mark they don’t own, or otherwise violates law/public policy, the arrangement (and fee retention) may be void, triggering mutual restitution (subject to equity limits).
Breach of conditions precedent
- Many franchises hinge on site approval, financing, or training. If a condition isn’t met (without your fault) and no waiver exists, the fee should be returned (minus any reasonable, documented processing costs that you agreed to).

4) When the franchisor may keep some or all of the fee

Express, written, and fair “non-refundable” clause tied to real, itemized costs (feasibility, site vetting, training) that were actually incurred and delivered.
Substantial performance already conferred (e.g., completed training you attended, full operations kit delivered, signage produced to spec). Even then, retention should be proportionate and provable.
Your fault caused the failure (e.g., you withdrew after approvals or concealed disqualifying facts). The franchisor may offset documented reliance damages.

Absent a signed non-refundable clause and proof of actual costs, keeping a hefty fee looks punitive and is vulnerable to refund claims.

5) Evidence that wins refund cases

Proof of payment: bank slips, official receipts, e-wallet confirmations.
Written trail: emails, messages, proposal decks, draft agreements, checklists, “welcome letters.”
What was (not) delivered: training invitations, manuals, kit inventories, site inspection reports—or their absence.
Brand ownership: proof they own or license the trademark (or evidence they don’t).
Government registration: SEC/DTI/Mayor’s permits for the franchisor entity (or absence).
Timeline: a clear chronology showing unreasonable delay or non-delivery despite payment.

6) Remedies and where to file

A) Demand + negotiation

Send a formal demand (see template, §12) invoking the legal bases, setting a deadline, and offering reasonable offsets (e.g., pay for any training you actually took).

B) Mediation / conciliation

Try community or commercial mediation; many disputes settle if the franchisor sees the risks (fees, publicity, litigation).

C) Civil actions

Sum of Money / Rescission / Annulment with damages (interest, costs, attorney’s fees).
Small Claims is available for lower amounts (procedurally faster; no lawyers required); for higher amounts, file with the proper trial court.
Ask for 6% legal interest per annum on the refundable amount from demand until full payment.
Consider asking for a Writ of Preliminary Attachment if there’s risk of asset dissipation (requires grounds and bond).

D) Regulatory angle (fact-dependent)

If the scheme functioned like an investment contract (profit from others’ efforts), it may implicate securities rules—useful leverage for settlement or separate enforcement.
Fair trade/advertising complaints may be possible if there were deceptive sales practices. These routes don’t guarantee a refund but can pressure compliance.

E) Criminal complaint (last resort)

Estafa (swindling) may lie where there is deceit at the time of taking the fee and damage. It’s fact-intensive and shouldn’t be used as mere leverage; consult counsel.

7) Money back mechanics

Full refund if nothing of value was delivered and there’s no valid non-refundable covenant.
Partial refund if the franchisor shows actual, reasonable, and contractually contemplated costs (e.g., training you completed, customized materials already produced).
Interest typically at 6% p.a. from date of extrajudicial demand; if you sued, then from date of judgment until paid (exact reckoning depends on the court’s dispositive portion).
Taxes/withholding: If you withheld tax on the fee or received invoices, both sides should reverse/credit the entries properly (e.g., credit memo) to avoid VAT/EWT mismatches.

8) Special issues

Trademark license without a contract? Using the franchisor’s mark without a signed license risks IP liability; conversely, a franchisor who never grants a proper license cannot claim ongoing royalties or keep your fee for a license they never lawfully conferred.
Arbitration clauses. If no written, signed arbitration clause, you’re usually not bound to arbitrate—court filing is open.
Reservation vs. franchise fee. A small reservation/application fee can be non-refundable if clearly disclosed in writing and tied to processing; trying to convert a large franchise fee into “non-refundable” without a signed contract is much harder to defend.
Good faith reliance. Courts dislike windfalls. If you received real, measurable benefits (e.g., proprietary training you keep), expect equitable deductions.

9) Franchisor compliance checklist (to avoid refund liability)

Use a clear, signed Franchise Agreement before taking the full fee.
If you must collect early: limit to a documented, modest reservation fee, escrow the balance, and issue plain-language disclosures.
Own/license the trademark and show proof.
Itemize what the fee covers and when each component is delivered.
If the deal fails, refund promptly, less documented, agreed costs.

10) Franchisee due diligence checklist (before paying)

Verify the brand owner and business registrations.
Ask for a draft Franchise Agreement and read the non-refundable language.
Require a timeline: site approval → training → fit-out → opening.
Clarify what triggers a refund and how much is deductible.
Avoid paying the full franchise fee until the agreement is signed and conditions (like site approval) are met.

11) Litigation playbook (franchisee)

Assemble the record: payments, messages, drafts, promos, identity of officers.
Demand letter with refund figure and legal basis; set 10–15 banking days deadline.
If ignored, file civil action (or small claims if eligible). Plead unjust enrichment, solutio indebiti, rescission/annulment, damages, interest.
Consider ex parte preservation steps (e.g., annotation on business name/IP complaints) if there’s asset flight risk.
Be open to settlement with a mutual release and non-disparagement.

12) Short, adaptable demand letter

Subject: Refund of Franchise Fee – No Executed Franchise Agreement

Dear [Franchisor/Company], On [date], I paid ₱[amount] as franchise fee for the proposed [Brand] franchise. Despite repeated follow-ups, no written Franchise Agreement has been executed, and no franchise package has been delivered.

In the absence of an enforceable contract and for failure of consideration, retention of my payment constitutes unjust enrichment. I therefore demand a refund of ₱[amount] within [10/15] banking days from receipt of this letter. If you claim any deductible processing costs, kindly provide itemized official receipts; otherwise, I will treat the entire amount as refundable.

If I do not receive payment or a concrete refund schedule by the deadline, I will pursue appropriate civil remedies (with legal interest) and explore regulatory and other avenues.

Sincerely, [Name] [Address / Email / Mobile]

13) FAQs

Q: We shook hands, I paid, they trained me, but still no contract. A: You may get a partial refund (net of real, delivered benefits). If training was substantial and clearly part of the fee, expect equitable deductions.

Q: There’s a signed “non-refundable” receipt but no franchise contract. A: If the receipt alone doesn’t fairly disclose what is non-refundable and why, or if nothing was delivered, courts can still order refunds (in whole or in part).

Q: The franchisor says the fee covered “brand reservation.” A: Ask for the written policy and proof of costs. For hefty sums, “reservation” alone—without a contract or deliverables—rarely justifies zero refund.

Q: Can I stop their use of my site layout or plans I paid for? A: If you funded custom materials, you can assert ownership or paid license; demand they cease using them if the deal collapses.

14) Bottom line

Taking a large franchise fee without a signed agreement is a legal risk for franchisors.
Franchisees have solid refund pathways—lack of enforceable contract, non-delivery, fraud, and unjust enrichment chief among them.
Keep the paper trail, demand early, and be ready to accept reasonable, documented costs if real benefits were delivered.
The safest path is simple: no signed contract, no full franchise fee.

Disclaimer: This article provides general information based on Philippine legal principles. Outcomes depend on specific facts and evolving jurisprudence. Consult counsel for tailored advice, especially for high-value fees or cross-border franchising.