The notion of franchising has of late become an increasingly popular business model in the South African market, due to its important benefits for all parties to franchise agreement.
It is, however, important to structure the franchise agreement properly to avoid any financial losses for both the franchisee and franchisor.
In addition to the franchise agreement supporting the underlying notions of fairness and integrity, it would be advisable for all franchisees to conclude a non-disclosure agreement with the franchisor.
The Consumer Protection Act 68 of 2008 now also regulates franchising and non-disclosure agreements, whereby a franchisee is also considered a “consumer” in terms of the Act. The onerous provisions relating to product liability will therefore also be applicable to franchisees.