Many well known South Africa franchises are based on long running agreements between franchisors and franchisees. Portions of these agreements or, in some cases, the full agreements may very soon be found to be invalid because they may be found to be contrary to current South African legislation.
More specifically, the Consumer Protection Act 68 of 2008 and the Competition Act 89 of 1998 contain specific provisions that are contrary to well established franchising principles.
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.
The Consumer Protection Regulations, which are referred to in the Consumer Protection Act will come into effect in the first half of 2011 and will then regulate the relationship between franchisors and their franchisees. Franchisors are therefore advised to review their franchise contracts in light of new legislation as a matter of urgency.
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.