Franchising is greater than a contract, it’s a system of governance

Though franchisees are thought to be being in enterprise for themselves, they’re a part of a broader community and have purchased into and should abide by another person’s enterprise mannequin. This can be a franchising settlement

In line with Tanya Woker, Professor of Regulation and writer of The Franchise Relationship under South African Law, there’s a want to make sure the best steadiness between the rights of franchisors to guard their networks and the rights of franchisees to learn from the funding they’ve made.

Greater than only a authorized contract

On the face of it, the authorized relationship between a franchisor and franchisee appears to be comparatively simple. The courts have all the time handled the franchising settlement as a traditional business contract interpreted in response to the overall ideas of the legislation contract. In observe nevertheless, franchising is a lot greater than only a contract; it is usually a system of governance which includes an intricate set of authorized rights with particular necessities, calls for, challenges, prices and complexities. Though franchisees are thought to be being in enterprise for themselves, they’re a part of a broader community and have purchased into and should abide by another person’s enterprise mannequin. When particular person disputes come up, there could also be a lot broader points at stake than merely the pursuits and considerations of a single franchisee.

Model safety is vital

Profitable franchising depends upon uniformity of excellent high quality efficiency. Prospects wish to know that regardless of the place they’re on the planet, in the event that they see a recognised commerce mark they know they are going to be getting the identical high quality and repair with which they’re acquainted. Some of the essential tasks of franchisors is to guard and keep the picture of their manufacturers. Because of this they are going to place comparatively onerous burdens on their franchisees to make sure there are enough checks and balances within the contracts to manage errant franchisees. Franchisors will management issues comparable to work hours, look of the outlet, high quality of products and placement. They may also retain the best to observe franchisee efficiency by means of common checks, audits and studies.

Balancing possession and management

A essential function of the connection is the truth that while franchisees personal the property of their companies the franchisor has the ability to find out how the property are used. This distinction between possession and management results in an in-built energy imbalance within the franchisor-franchisee relationship. This energy imbalance is inevitable and should be understood by franchisees. Sadly it may be abused if franchisors interact in opportunistic behaviour. Nevertheless, it isn’t additionally straightforward to tell apart between franchisor opportunism or mandatory steps to guard and improve manufacturers. It’s also very tough for particular person franchisees to problem franchisor energy, as a result of in the event that they do present dissent, franchisors could train their proper to terminate or they could refuse to resume agreements.

Aiming for a win-win relationship

If every part that impacts the franchise relationship has been correctly thought by means of and documented, the events to the association will know from the outset the place they stand. Because of this, there will likely be fewer surprises and a diminished probability of disagreements arising at a later stage.

To make sure the win-win outcomes which are the hallmark of a profitable franchise community, franchise agreements must steadiness the rights of the events with their respective obligations, preserving in thoughts that the franchisor wants the ability to implement compliance with sure pointers that go to the center of community efficiency. Though the franchising settlement ought to attempt to grant equal rights and obligations to the events, practicalities dictate that the franchisor’s rights should be stronger in sure respects to make sure sufficient management over the model.

The laws to the Consumer Protection Act comprise complete provisions as to what a franchising settlement ought to embrace. Many different provisions of the CPA may also have an affect on franchise agreements, as an illustration: the sections stating that agreements (which embrace franchise agreements) should be in plain and comprehensible language.

Supply: Franchise Affiliation of South Africa –