The Covid-19 pandemic has hit the pockets of many South African businesses and the situation has been no different in the franchise industry as the majority of franchisees are Small and Medium-sized Enterprises. Most franchisees are classified as non-essential services and as a result, have been forced to close their businesses for the duration of the Covid 19 enforced lockdown. Even with the gradual phasing in of return to business, fast food franchisees remain closed for on-site consumption. Personal care franchisees such a beauty salons and hairdressers remain closed all together.

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About the letter for landlord template

Due to the effects of COVID-19, non-essential goods/services retail tenants, a substantial number of which are franchised businesses, have been forced to cease trading during the lockdown period, resulting in their inability to pay rent.
To complicate matters further, most franchise agreements contain clauses stating that a franchisor may terminate the franchise agreement in the event that the franchisee breaches any material terms of its lease agreement.

Therefore, instead of breaching your lease agreement for non-payment of rentals, and in turn falling foul of your franchise agreement, it is strongly suggested that you immediately contact your landlord with a proposed payment plan setting out how you intend maintaining your business relationship with your landlord during the upcoming months whilst you navigate the “new normal” caused by this global pandemic.

Download this template which may be used as a guide to assist you with negotiating with your landlord.

Alex Protulis
+27 (0) 11 325 4201
alex@cm-attorneys.com

With clothing and other retailers (non-essential services) being barred from trading during lockdown, rental obligations are under intense debate. Kayla Shadiack, senior associate at Christodoulou & Mavrikis Inc, a FASA service provider member gives an overview and guidelines to navigating the legalities of rentals.

Certain retail groups, including The Foschini Group, Truworths, Mr Price Group, Woolworths and Pepkor have been in negotiations and discussions with the Property Industry Group, and made a counter proposal to pay R220 million as a collective group which would amount to 20% of their normal rental to be paid.

According to a statement issued by the National Clothing Retail Federation of South Africa, retailers are in discussions with the Property Industry Group, representing retail landlords in a bid to find a joint and “mutually beneficial response” to the significant challenges created by Covid-19 pandemic and have proposed that 20% of normal rental be paid during lockdown as a “general guideline” to the industry.

This proposal does not necessarily set a precedent as it is merely a guideline and has led to tenants calling on landlords to enter into negotiations to waive rent payments, decrease monthly rentals, or to defer rental payments. Another proposal from tenants has been to impose strict turnover based rentals without a base minimum.

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Interview about labour law related to employers and employees during the covid-19 lockdown in South Africa.

Christo Bester who is the legal services manager at the LWO Employers Organisation, which is registered with the Department of Labour. Christo has a BProc and LLM (Mercantile Law) degree, a Certificate in Advanced Labour law and is an admitted attorney of the High Court with extensive experience in various aspects of practicing law in the business environment.

Following a recent case where the Commission for Conciliation, Mediation and Arbitration (CCMA) compelled a Spar Franchisee to comply with compliance orders issued and pay all complainants an amount of R 11,935,478 for gross violations of labour laws which were happening at their stores across the country, we asked Ansofie van der Walt of the LWO Employers Organisation to give labour guidelines.

Labour law sets strict requirements that employers must comply with. Non-compliance holds a serious business risk for employers that is often underestimated and left unaddressed. Arbitration awards against employers have a definite financial impact and also negatively affect the business’s brand name. Compliance with labour law is critical for every employer, irrespective of the number of employees or business industry.

What can employers do to protect their businesses?

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FASA’s help-line received an interesting inquiry on paying royalties for playing music in public places as there seem to be two different collecting societies claiming

Question

Both SAMRO and SAMPRA appear to be invoicing franchised outlets that play music in their outlets.

– SAMRO is a copyright administration business dealing with primarily the administration of music composers’ and authors’ Performing Rights.

– SAMPRA is a collective licensing society of copyright owners of music sound recordings.
How would a franchise owner verify the collecting society’s legitimacy and should the business pay both these organizations?

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A franchisor asked FASA’s Help Line to explain the CPA’s stipulation that the marketing fund must be a separate account and how that can be practically interpreted.

Question from a franchisor:

From a practical perspective our marketing contributions are in a separate accounting account/cost centre, but not in a separate bank account. The reasons are purely practical and an effort to save banking fees and also to make the life of franchisees easier in paying everything into one bank account, although they are invoiced separately.

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Compliance with legislation can be intimidating, especially for business owners without a legal background. Labour law is not negotiable and poses a business risk to the employer. To comply with legislation is not a luxury, it is a must and can be overwhelming in terms of specialist knowledge, as well as time-consuming. Employers should, however, realise that legislation can also be used to protect your business and minimize risk by proactively positioning the business with regards to possible future disputes.

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The three new Acts signed into law by Cyril Ramaphosa will affect how we drive, will act on fraudulent qualifications and give debt relief to lower-end earners. Whilst some of these laws have been in the pipeline for some time, there has been mixed reaction to these new pieces of legislation.

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A recent exposé on an investigative television programme put the spotlight on the compliance of franchise companies with the Consumer Protection Act’s Regulations and with the Code of Ethics as set down by the Franchise Association of South Africa (FASA). FASA, as a voluntary organisation representing the industry, regularly fields complaints from franchisees with some of the more common complaints related to non-member franchisors being:-

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