Maria D’Amico-Consultant

Should the franchisor evaluate their franchising documents for compliancy?

When a prospective franchisor approaches the Franchise Association of South Africa (FASA), 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:

1.         The Consumer Protection Act No. 68 of 2008 (the CPA); and

2.         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.

Regulation 2 of the CPA (regulation 3) requires that the FA must (as a minimum) contain the prescribed information set out in regulation 2.

The franchisor may (over time) update their FA to comply with certain practical scenario that arises in their business system and franchised business.

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 provides further 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.

In summary, a franchisor (whether they are a member of FASA or not) should ensure that their FA and DD continue to comply with the CPA and the Code (if they are a member of FASA), when they make amendments to the franchising documents.

Contact maria@thomsonwilks.co.za  for further assistance if you find yourself in need of franchising advice.

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