Legal Implications Of Franchising In South Africa

whichfranchise.co.za:

South Africa does not have legislation in place that regulates franchise relationships. This does not mean that franchises operate in a legal vacuum – far from it. The main pieces of legislation that impact on franchising are:

• Laws governing intellectual property; in this context, the Trademarks Act, No. 194 of 1993, is of particular importance.

• The Competition Act, No. 89 of 1989 and the Rules for Conduct of Proceedings in Terms of the Act. It is an unfortunate reality that on the face of it, franchising infringes against several clauses of the act although this was never the intention of its drafters. To address this, the Competition Commission published a paper entitled The application of certain provisions of the Competition Act 89 of 1998, as amended, to franchise agreements, which aims to clarify the Commission’s stance on franchising. It can be accessed on the web site of the Franchise Association of Southern Africa – www.fasa.co.za.

• The Consumer Affairs Act, No. 71 of 1988, which has been amended by the Harmful Business Practices Amendment Act, No. 23 of 1999.

We mention these acts in the interest of providing comprehensive information to franchise practitioners and students of franchising. Should you plan to invest in a franchise, examining these pieces of legislation would be overkill. All you need to know is that to enter into a franchise arrangement has legal implications. There is no need to worry unduly about this but you need to be prepared. As you take the evaluation process forward, you can expect to come across most if not all of the following documents:

Secrecy undertaking

Disclosure document

Franchise agreement

Operations manual

Lease agreement over premises

Funding agreements

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