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A prospect sits across from your franchise officer. The tasting went well. The brand presentation went well. Then comes the question:
"Sir, magkano po ang guaranteed monthly? Kasi 'yung isa, 4% a month daw, wala na akong gagawin."
How your team answers that question says a lot about your franchise system.
In late October 2026, the Securities and Exchange Commission (SEC) issued an advisory against a so-called franchise offering a guaranteed 4% monthly return. As reported in the Philippine Daily Inquirer on October 28, 2026, the offer was a restaurant "franchise co-ownership" with no need to operate or manage a branch, and promised returns rising from 2.5% a month to 4% a month depending on the amount placed.
The SEC said such arrangements are "investment contracts": people put money into a common enterprise expecting profits from the efforts of others. Under the Securities Regulation Code, these must be registered, and anyone offering or selling them needs the proper registration or license. The SEC also warned that promoters, recruiters, influencers and endorsers soliciting for such offers can face criminal liability under the Securities Regulation Code and the Financial Products and Services Consumer Protection Act, with penalties of up to ₱5 million in fines, up to 21 years in prison, or both. In other words, the "franchise" label did not change what the offer really was, and the sales talk itself became the problem.
For legitimate franchisors, this is a moment to tighten up. Buyers are more careful now, and that's good news for brands that do things right.
The difference, in plain words
A franchise is a business the franchisee runs, using your brand, your system and your support. The franchisee carries the effort and the risk, and earns from their own operation.
An investment scheme sells the promise of returns from someone else's effort. "Ilagay mo lang ang pera, kami na ang bahala."
We're not lawyers, and this isn't legal advice. But in our 35 years in business and 350+ brands helped, we've seen that the line usually gets blurry in the sales talk, not in the contract.
6 practical steps to keep your offer clearly a franchise
1. Never promise a fixed return. Not in ads, not in chats, not in the sales kit. You don't control the franchisee's location, crew or effort, so you can't promise their income. Share realistic ranges from actual branches only if you can back them up, and say clearly that results vary.
2. Make the franchisee's role visible. Your materials should show what the franchisee does: hire and lead the crew, follow the manual, order supplies, attend training. If your offer sounds like "wala kang gagawin," rewrite it.
3. Train your sales team and resellers. Most problems start with one eager agent. Give them a short script for the "guaranteed po ba?" question. Something like: "Wala pong guaranteed. Ito po ang ginagawa ng mga franchisee namin, at ito ang support na binibigay namin."
4. Let prospects talk to real franchisees. Confident franchisors open the door. Let serious prospects visit branches and ask owners about the good and the hard parts.
5. Explain the agreement before they sign. A franchisee who understands their obligations won't later say they were "promised" something. We wrote about this in Why You Should Explain the Franchise Agreement to Your Franchisee Before They Sign.
6. Prove the model in your own branch first. Numbers from a company-owned pilot branch are your most honest sales tool. See Company-Owned Pilot Branch: Why You Need One Before Franchising.
What about "passive" investors?
Some prospects truly want to invest but can't operate. Many franchisors handle this by requiring a hands-on operator or manager approved and trained by the brand, so the branch is still run like a real business. Whatever your setup, get proper legal advice on structure. Don't improvise it in the sales chat.
And be choosy. The best franchisees are owners who will show up. Our guide on franchisee traits and requirements can help you screen.
Quick self-check for franchisors
- [ ] No ad, post or brochure mentions "guaranteed" income or a fixed monthly percent
- [ ] The franchisee's daily role is written in the offer
- [ ] Sales staff and resellers have a script for return questions
- [ ] Prospects can visit branches and talk to franchisees
- [ ] The agreement is walked through before signing
- [ ] Income figures, if shared, come from real branches and say results vary
- [ ] No recruitment bonuses for bringing in more "investors"
Any box unchecked? Fix it before your Christmas-season marketing goes out.
Trust is your real asset
Peanut World's owner says publicly on our homepage that we helped them grow "from 7 to 70 in two years." Growth like that is built on franchisees who know exactly what they signed up for.
At GMB Franchise Developers, we help brands build franchise systems the right way: proven pilot operations, clear manuals, honest sales materials and training that sets franchisees up to run the business well.
"A real franchise sells a system to run, not a return to wait for."
Over to you: Franchisors, how does your team answer when a prospect asks for a guaranteed monthly income? Share your best answer in the comments.
Want to know if your franchise offer is ready for careful 2027 buyers? Take the Franchise Readiness Check with GMB Franchise Developers via gmb.ph, or send us a message and we'll walk through it with you.
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About the author Armando "Butz" Bartolome, The Franguru, has 35 years in business and has helped 350+ brands. He is the founder of GMB Franchise Developers. Read his coaching for small business owners and first-time franchise buyers at butzbartolome.com.
© 2026 Armando "Butz" Bartolome and GMB Franchise Developers. All rights reserved. This article first appeared on https://gmb.ph/franchise-or-investment-scheme-how-franchisors-stay-on-the-right-side/. Sharing the link is welcome; copying or republishing without written permission and credit is not allowed.