Together with the Franchise Agreement, the Disclosure Document is the most important document in franchising, both documents being strictly governed by the Consumer Protection Act 68 of 2008 (CPA) which came into effect on 01 April 2011. It is a legal requirement that franchisors provide prospective franchisees with a compliant Disclosure Document but unfortunately some franchisors still overlook this legality.
It is unfortunate for the franchisor as they are exposing themselves to huge risk and also unfortunate for the prospective franchisee, who possibly unknowingly, is not receiving a compliant Disclosure Document on which s/he is probably going to base their decision on and in some instances make a large investment.
Please click on http://fasa.co.za/fasablog/warned-disclosure-documents-cpa-compliant/ to read more about this, especially what the consequences are under the heading “What happens if franchisors don’t comply?”
It may be sound practice that Franchise Agreements have a clause that confirms that the Disclosure Document is CPA compliant. Alternatively, prospective franchisees should request in writing from the franchisor that the franchisor’s Disclosure Document is CPA compliant.
If you are a franchisor and have any doubt that your Disclosure Document may not be CPA compliant, please contact me on firstname.lastname@example.org and we will have one of our experts assess your Disclosure Document.
SA Franchise Brands