Franchising: When the franchisor grants licensing rights to a franchisee to use the franchise business system. The franchisor will remain the owner of all intellectual property rights surrounding the business system.

Franchiser Agreement

A franchise agreement should specify the basis on which the franchisor will allow franchisees to use the franchisor’s business system and intellectual property rights, including trademarks, copyright and know-how. This document should outline all terms and conditions surrounding the use of the franchise system, as well as the obligations of both the franchisor and the franchisee.

The protection of a franchisor’s business system and intellectual property in relation thereto, is of utmost importance. It is essential that a franchise agreement properly identifies all aspects of the franchisor’s business system, intellectual property and other proprietary rights. A competently written franchise agreement is a key factor to promote and enhance a win-win situation and to protect the rights of both the franchisee and the franchisor, as well as the entire franchise operation. A franchise agreement should also focus on and accommodate the needs and requirements of the specific franchise operation and control the relationship between the parties in a positive and constructive manner.

Disclosure Document

The purpose of a Disclosure Document is to provide a prospective franchisee with adequate information surrounding the franchise business. The Disclosure Document should enable a prospective franchisee to evaluate the franchise system and the viability of the franchise business. In terms of the Consumer Protection Act, franchisors are obliged to provide franchisees with a Disclosure Document containing the minimum prescribed information.

Operations Manual

The Operations Manual is a detailed outline of the day to day operations and procedures of the franchise business. This manual should enable franchisees to manage the franchise business effectively in accordance with predetermined standards and criteria. The franchisor should endeavour to compile the manual user friendly and comprehensive, to be a constant guide and source of operational reference for the franchisee. It is important that the operations manual reflects current business practises of the franchise system and should therefore be updated on a regular basis.

Franchise Transaction

Franchisors: A franchisor should ensure that all franchise documentation are in compliance with the relevant statutory requirements, including the Consumer Protection Act as well as other applicable legislation and regulations. A franchisor would be well advised to protect all intellectual property rights which may be applicable to the franchise system. A franchisor should properly quantify and qualify all rights and obligations of both parties in the franchise agreement in order to limit possible disputes.

Franchisees: A franchisee should understand the nature of the franchise transaction which it will be entering into. A franchisee should be advised on the risks and financial exposure regarding the franchise business. A franchisee should understand its obligations in terms of the franchise agreement as well as the fact that it will operate a licensed business. A franchisee should also be familiar with its rights as afforded in terms of the Consumer Protection Act.

More information about Franchise Law:

Franchising – Franchising means the licensing of a franchisor’s business model to a franchisee. The franchisor appoints franchisees to expand its business by means of separate and individual franchise outlets. The franchisor’s success will depend on the success of the franchisees as well.

Franchising in South Africa – When the franchisor grants licensing rights to a franchisee to use the franchise business system. The franchisor will remain the owner of all intellectual property rights surrounding the business system.

Franchise Operations Manual – A franchise operations manual is the primary document that governs the day to day franchise procedures and operational requirements. The manual should be specify in detail the procedures with which franchisees should comply in order to operate their franchise business.

Franchising Legal Advise – Franchise law is specialised and differs from other areas of law, thus you need find yourself an attorney that specialises in this specific type of law. Franchise attorneys represent the franchisor, as well as the franchisee. Smit & Van Wyk, Inc. specialist franchise attorneys  provide both franchisors and franchisees assistance and legal advice.

Franchise Attorneys – Esmari Jonker is an Attorney of the High Court of South Africa with more than 16 years experience with franchise agreements (franchise contracts), litigation and intellectual property. She acts on behalf of local as well as international clients in the franchise industry.

Buying a Franchise – Rather than starting your own business, you can purchase an established successful business franchise. Buying a franchise has it’s advantages and disadvantages, but it is at least a path to self employment. Before you invest, make sure you do a lot of investigating and preparation.

Starting a Franchise – A business that has set out its systems and procedures, and is trading profitably, may choose to start a franchise. Successful franchising is difficult but if you want to expand your business to its’ maximum size and profitability, you may wish to franchise your business. If you are the franchisor you may benefit from additional profits and you may retain control over your business system.

Franchise Agreements – Are you a business owner and want to start franchising, or do you want to purchase a franchise from an existing organization? Regardless, if you are entering a franchise relationship, you will need a franchise attorney to setup the franchise agreements and other legal documents. The franchise relationship between a franchisor and franchisee will mostly be controlled and governed by a franchise agreement.

Franchise Attorneys – How a franchise agreement is setup depends on the type of franchise. Each franchise agreement will have provisions that include royalty payments, franchise location, design, products, operations, insurance, and duration.

Franchise Agreements in South Africa – Principles like fixed pricing structures and the definition of exclusive franchisee territories are contrary to the provisions in the Competition Act. Similarly, principles like restrictive purchase conditions are contrary to the provisions in the Consumer Protection Act.

About the Franchise Agreement – A franchise agreement is in essence not defined in separate category of law, but is governed by existing law of contracts.  More specifically, a franchise agreement is a licence agreement whereby certain intellectual property is licensed by a franchisor to a franchisee.