Although the Franchise Association of South Africa (FASA) has been successfully flying the flag for ethical franchising for the past 33 years, it remains a voluntary organisation that attracts franchisor members who choose to run their businesses along acceptable international franchise practices.  With the introduction of the Consumer Protection Act (“CPA”), FASA was able to motivate inclusions that deal directly with franchising, ensuring that all franchisors, whether FASA members or not, adhere to key areas of good business practice.

To this end, FASA has embarked on an awareness campaign called ‘Don’t sign without the Sign’ aimed at prospective franchisees looking to invest in franchises, making them aware that the CPA requires compliance by all those who operate in the franchising space and assuring them that FASA members, in particular, have complied not only to the CPA requirements but to international best practices.  “It also serves as a warning to franchisors, whether FASA members or not that they could fall foul of the CPA if they do not comply” says Vera Valasis, FASA’s executive director.

Eugene Honey, of Adams & Adams and FASA’s legal advisor, who played a crucial role in lobbying the CPA lawmakers to include franchising in the provisions of the Act, believes that this is a step in the right direction for the franchise sector. “The CPA applies to franchise agreements and enforces disclosure and poses significant challenges to weaker franchisors, including those that do not abide by best franchise practices or provide reasonable value to their franchisees.”

Since the introduction of the CPA, FASA has stepped up its scrutiny of its members ensuring that they submit their Disclosure Documents on an annual basis and that they live up to the high ethical principles that the association is known for.  A disciplinary committee handles cases brought to FASA’s attention. It will initially attempt to resolve any issues through mediation and many cases are successfully resolved in this way.  But, according to Ian Jacobsberg of Eversheds and the Chairman of FASA’s Disciplinary Committee, FASA has had to, in some instances, take the decision not to renew an offending franchisor’s membership.  “A case in point,” says Jacobsberg, “related to a food franchise company that, whilst enjoying exponential growth in the opening of new franchises, failed to match that growth with sound head office infrastructure, resulting in some dissatisfied franchisees who felt they were not getting adequate support.”

Being a voluntary association also has its drawbacks, according to Vera Valasis, and hopes that the CPA will have an impact on irresponsible franchisors.  “A recent case involved members in the business-to business sector where the franchisor, who granted master franchisee licences, failed to take responsibility for the transgressions of those franchisees, promptly resigned from the association to avoid taking responsibility.  It is hoped that, ultimately, the principles of ethical franchising championed by FASA will be given force of law and these transgressors will have to be accountable to the Consumer Commission.”

As the CPA starts to clamp down on unethical businesses and FASA becomes more stringent in its dealings with its members, the association’s ‘don’t sign without the sign’ campaign will gather momentum as prospective franchisees and the public will have confidence in taking up business opportunities from FASA members, become successful business people in their own right and join what is without doubt the world’s most successful business format – franchising!

Contributor: Vera Valasis, Executive Director of FASA.

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