Franchising and the Consumer Protection Act

Newsletter Ask The Experts

 

The Consumer Protection Act, No. 68 of 2008 (CPA) was implemented on 31 March 2011 and has a direct bearing on the franchise industry. Prior to the implementation date, the franchise industry was largely unregulated, resulting in the conducting of unscrupulous business by some franchisors. With the implementation of the CPA, the industry is now strictly regulated by legislation which sets out to promote a fair, accessible and sustainable marketplace for consumer products and services.

The CPA has implications for both franchisors and franchisees alike which must be strictly adhered to.

  • Franchisors must be certain that their franchise agreements and disclosure documents are CPA compliant, meaning that specific information must be contained in both these documents or they may face serious consequences from the National Consumer Tribunal. Should the Tribunal find that the franchisor did engage in prohibited conduct, it may impose an administrative fine of 10% of the franchisor’s annual turnover or R1 000 000 whichever is the greater.
  • Franchisees are also affected by the CPA as they are suppliers of products and services in their own right in their dealings with customers. The franchisor’s brand may be negatively affected if franchisees don’t comply with the Act.
  • Franchisors should have their franchise agreements and disclosure documents audited to be certain that they are CPA compliant, eliminating the risk and conducting ethical business.

Remember to visit www.safranchisebrands.co.za for Franchise Opportunities.

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