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 response to Tanya Woker, Professor of Regulation and writer of The Franchise Relationship under South African Law, there’s a want to make sure the correct steadiness between the rights of franchisors to guard their networks and the rights of franchisees to profit 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 easy. The courts have all the time handled the franchising settlement as a standard business contract interpreted based on the overall ideas of the legislation contract. In follow nonetheless, 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 will depend on uniformity of fine high quality efficiency. Clients wish to know that regardless of the place they’re on this 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 vital duties of franchisors is to guard and preserve the picture of their manufacturers. For that reason they’ll place comparatively onerous burdens on their franchisees to make sure there are ample checks and balances within the contracts to manage errant franchisees. Franchisors will management issues equivalent to work hours, look of the outlet, high quality of products and placement. They may also retain the correct to observe franchisee efficiency by way of common checks, audits and studies.

Balancing possession and management

A crucial characteristic of the connection is the truth that while franchisees personal the belongings of their companies the franchisor has the ability to find out how the belongings 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 have interaction in opportunistic behaviour. Nonetheless, it isn’t additionally simple to differentiate between franchisor opportunism or crucial steps to guard and improve manufacturers. Additionally it is very troublesome 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 might refuse to resume agreements.

Aiming for a win-win relationship

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

To make sure the win-win outcomes which might be the hallmark of a profitable franchise community, franchise agreements must steadiness the rights of the events with their respective obligations, retaining in thoughts that the franchisor wants the ability to implement compliance with sure tips 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 ample management over the model.

The laws to the Consumer Protection Act include 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 example: the sections stating that agreements (which embrace franchise agreements) should be in plain and comprehensible language.

Supply: Franchise Affiliation of South Africa –