Category: Franchise Agreements

In franchising, one generally follows the industry norm when it comes to determining the royalty fees. This is generally a percentage of sales calculated as follows: 10% of gross profit multiplied by the sales. For example, a fast-food outlet needs to generate a gross profit margin of 60% on average; therefore the royalty will be 6% of sales. Eric Parker, industry stalwart and founder at franchise consultancy Franchising Plus, has been thinking and questioning the standard practice that franchisors have been following all this time: Should the royalty/management service fees be the same for the entire agreement period? Should successful …

In a typical franchise relationship, the franchisor provides its franchisees with the right to use its intellectual property, comprising: the right to use know-how and trade secrets developed by the franchisor; and the right to use the franchisor’s trademarks and branding and capitalise on the goodwill associated with them. Ian JacobsbergIan is a practicing attorney with over thirty years’ post-admission experience in the areas of competition, consumer and commercial regulatory law as well as corporate, commercial and other business-related law. His expertise and experience includes data protection and processing, mergers, acquisitions and sales of business, competition law, economic regulation (including …

As more and more shopping malls and strip malls sprang up around the country, the big supermarkets flexed their corporate muscle by building in exclusivity clauses into their leases which often prevented smaller supermarkets, butchers, bakeries, greengrocers, and delis being part of the tenant mix. After five years of the Competition Commission’s Grocery Retail Market Inquiry, their final report makes strong recommendations on the food retail industry, including a call for the monopoly leases between landlords and the big supermarket chains to come to an end. The exclusivity lease practice will be phased out as those implicated supermarkets’ existing leases …

The key to making an educated decision when becoming a franchisee is to make sure that the franchise you are investigating has a Disclosure Document as required by the provisions of the Consumer Protection Act as they relate to franchising. Becoming a franchisee can be somewhat daunting, especially when you don’t know how to make sense of the various franchise opportunities or to evaluate a particular franchisor’s operation. Thankfully, the Consumer Protection Act, 68 of 2008 (“the CPA”) has stepped in, assisting prospective franchisees by compelling franchisors to provide prospective franchisees with a disclosure document. Pieter SwanepoelPieter has extensive experience …

A franchise agreement may be cancelled after the ten day cooling off period has expired, if: the agreement itself is invalid, or where one of the parties has been induced to enter into it by a misrepresentation by the other, or where one of the parties has committed a material breach of the agreement. If a franchise agreement contravenes, or does not comply with, the requirements of the CPA or the regulations, including the stipulations of the regulations in respect of deposits and initial payments, the agreement will be invalid, either in total or to the extent of the contravention. …

Where No Franchise Agreement has been signed FASA’s Code of Ethics provides for deposits paid in anticipation of the conclusion of a franchise agreement in the following terms: “Where a Franchisor Member receives any monies from any prospective franchisee in contemplation of the conclusion of a Franchise Agreement…and, whether at the instance of the Franchisor Member or the prospective Franchisee, negotiations in connection with such contemplated agreement are terminated without an agreement being concluded: –   FASA Franchise Association South AfricaTo protect, lobby, promote and develop ethical franchising across all sectors in South Africa with specific focus on transformation. www.fasa.co.za …

It is common practice, during the course of discussions between a franchisor and a prospective franchisee, with a view to concluding a franchise agreement, for the franchisor to require the franchisee to make payment of a deposit. In such cases, the franchise agreement, or another document that the franchisor requires the franchisee to sign, in anticipation of the conclusion of a franchise agreement, often states that the deposit is “non‑refundable” in the event that a franchise agreement is not signed, or, having been signed, is cancelled shortly thereafter. There remains a significant amount of misunderstanding around the question as to …

Franchise Agreement – FASA Practice Note – Section 197 of the Labour Relations Act The termination of a franchise agreement by the franchisor does not in itself constitute a transfer of a business as a going concern, even if the franchisor thereafter appoints another franchisee in the same area, and serving the same customers, as the previous franchisee.  Therefore, the new franchisee is not obliged to take over the rights and obligations of the previous franchisee towards its employees, as is required in terms of section 197 of the Labour Relations Act on the transfer of a business as a …