Should the franchisor evaluate their franchising documents for compliancy?
Franchising documents must be compliant
When a prospective franchisor approaches the Franchise Association of South Africa (FASA) to apply for membership, their disclosure document (DD) and franchise agreement (FA) (collectively the franchising documents), amongst other documents, are evaluated by FASA, through their panel of attorneys, to ensure that the franchising documents comply with:
- The Consumer Protection Act No. 68 of 2008 (the CPA); and
- The FASA Code of Ethics and Business Practices (the Code)
The purpose of the Code is to ensure a system of self-regulation and compliancy with applicable laws in the public interest and that of the members of FASA. The code furthermore states that FASA aims to ensure that their members practice the highest standard of ethics and fair business practices in franchising and to develop and expand the business environment for franchising in South Africa.
Franchise Agreement
Regulation 2 of the CPA (regulation 2) requires that the FA must (as a minimum) contain the prescribedinformation set out in regulation 2, to make it compliant with the CPA.
Over time since the franchisor becomes a member of FASA, a franchisor may amend their FA for various reasons. After the amendments are made, the franchisor must be mindful that the FA must continue to comply with the CPA.
Disclosure Document
Regulation 3 of the CPA (regulation 3) requires that the DD must (as a minimum) contain the prescribed information set out in regulation 3.
The Code requires that the DD of a franchisor who is a member of FASA must contain additional information over and above what is contained in regulation 3.
A franchisor should regularly update their DD as some of the information contained in the DD is not constant and is required to be regularly updated, i.e., projections including operating expenses of a franchised store.
Re-evaluate the franchising documents if necessary
As a result of the franchisor updating their FA and DD, it may be necessary for these franchising documents to be re-evaluated by a franchising attorney to ensure that they continue to comply with the CPA and the Code and we urge that franchisors consider this.
FASA’s Networking Event on Thursday 20th April between 11:00 and 12:00 will be discussing the importance of the franchise agreement that adheres to the conditions as laid out in the Consumer Protection Act. Existing franchisors and prospective franchisees are encouraged to attend this important network event where the legal experts will be on hand to explain and answer any questions. To book click here
Maria D’Amico holds an LLB in Law (obtained at WITS) and has been practicing as an attorney for 33 years and working at Thomson Wilks Attorneys.
Maria is an expert in commercial law, commercial litigation and franchising and her understanding of franchising law is invaluable to anyone involved in the franchising industry.
Maria is also qualified as a Solicitor in England, the United Kingdom, completed her Canadian legal conversion exams and is a Civil and Commercial Mediator (having obtained her certificate from the ADR – Alternative Dispute Resolution group in London).
