Franchising is greater than a contract, it’s a system of governance

Though franchisees are considered 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. It is a franchising settlement

In accordance with Tanya Woker, Professor of Legislation and creator of The Franchise Relationship under South African Law, there’s a want to make sure the suitable stability 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 at all times handled the franchising settlement as a standard business contract interpreted in accordance with the final rules of the legislation contract. In observe nonetheless, franchising is a lot greater than only a contract; it’s also a system of governance which entails an intricate set of authorized rights with particular necessities, calls for, challenges, prices and complexities. Though franchisees are considered 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 issues of a single franchisee.

Model safety is essential

Profitable franchising is dependent upon uniformity of excellent high quality efficiency. Clients wish to know that irrespective of the place they’re on the earth, 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. One of the necessary obligations of franchisors is to guard and keep the picture of their manufacturers. Because of this they are going to 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 corresponding to work hours, look of the outlet, high quality of products and site. They can even retain the suitable to watch franchisee efficiency by way of common checks, audits and reviews.

Balancing possession and management

A vital function of the connection is the truth that while franchisees personal the property of their companies the franchisor has the facility to find out how the property 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’s not additionally simple to differentiate between franchisor opportunism or essential steps to guard and improve manufacturers. It is usually very troublesome for particular person franchisees to problem franchisor energy, as a result of in the event that they do present dissent, franchisors might train their proper to terminate or they could refuse to resume agreements.

Aiming for a win-win relationship

If all the pieces 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. Consequently, there will probably be fewer surprises and a decreased 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 stability the rights of the events with their respective obligations, holding in thoughts that the franchisor wants the facility to implement compliance with sure tips that go to the center of community efficiency. Though the franchising settlement ought to try 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 rules to the Consumer Protection Act comprise complete provisions as to what a franchising settlement ought to embody. Many different provisions of the CPA can even have an affect on franchise agreements, for example: the sections stating that agreements (which embody franchise agreements) should be in plain and comprehensible language.

Supply: Franchise Affiliation of South Africa –