In terms of the Consumer Protection Act No. 68 of 2008 (“Act“), a franchise agreement is defined as:

“An agreement between two parties, being the franchisor and the franchisee, respectively-

a)    in which, for consideration paid, or to be paid, by the franchisee to the franchisor, the franchisor grants the franchisee the right to carry on business within all or a specific part of the Republic under a system or marketing plan substantially determined or controlled by the franchisor or an associate of the franchisor;

b)    under which the operation of the business of the franchisee will be substantially or materially associated with advertising schemes or programmes or one more trademarks, commercial symbols or logos or any similar marketing, branding, labeling or devices, or any combination of such schemes, programmes or devices, that are conducted, owned, used or licensed by the franchisor or an associate of the franchisor; and

c)    that governs the business relationship between the franchisor and the franchisee, including the relationship between them with respect to the goods or services to be supplied to the franchisee by or at the direction of the franchisor or an associate of the franchisor.”

In order for an agreement to be classified as a franchise agreement, the agreement must contain all the elements of the definition of a franchise agreement, namely (a), (b) and (c) as detailed above.

It does not matter whether a particular agreement is referred to as a administration agreement, alliance agreement, co-operation agreement, if it contains the elements referred to above it is a franchise agreement.

Franchise agreements must, in addition to the Act, specifically comply with the provisions of section 7 of the Act and sections 2 and 3 of the Regulations.

16 May 2011