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

Though franchisees are thought to be 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 keeping with Tanya Woker, Professor of Legislation and creator of The Franchise Relationship under South African Law, there’s a want to make sure the correct steadiness 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 simple. The courts have at all times handled the franchising settlement as a traditional industrial contract interpreted in response to the final ideas of the legislation contract. In observe nevertheless, franchising is a lot greater than only a contract; it’s also a system of governance which includes an intricate set of authorized rights with particular necessities, calls for, challenges, prices and complexities. Though franchisees are thought to be 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 vital

Profitable franchising depends upon uniformity of excellent high quality efficiency. Prospects wish to know that irrespective of the place they’re on this planet, 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. Some of the necessary duties of franchisors is to guard and preserve the picture of their manufacturers. For that reason they may place comparatively onerous burdens on their franchisees to make sure there are enough checks and balances within the contracts to manage errant franchisees. Franchisors will management issues comparable to work hours, look of the outlet, high quality of products and placement. They can even retain the correct to watch franchisee efficiency via common checks, audits and reviews.

Balancing possession and management

A vital function of the connection is the truth that while franchisees personal the belongings of their companies the franchisor has the facility to find out how the belongings 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 have to 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 mandatory steps to guard and improve manufacturers. It’s also 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 every part that impacts the franchise relationship has been correctly thought via and documented, the events to the association will know from the outset the place they stand. Consequently, there can be fewer surprises and a lowered chance 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 have to steadiness the rights of the events with their respective obligations, retaining 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 have to 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 embrace. Many different provisions of the CPA can even have an affect on franchise agreements, as an example: the sections stating that agreements (which embrace franchise agreements) have to be in plain and comprehensible language.

Supply: Franchise Affiliation of South Africa – www.fasa.co.za