Loyd Bryan S.

Arada
11506601

Franchising: Laws and Regulations

Franchising in South Africa is becoming more common as the opportunities arose from
increasing competition and the emergence of new players in the market. Even though the
economy of the country is under pressure and people are saving money instead of spending,
franchising is considered a good form of investment in South Africa (Courtney, 2016). During the
year of 2016, there has been an increased number of franchisors and franchisees especially in
the fast food franchises. It has been reported that there was an increase of 21% in new franchise
systems and 13% increase of franchise outlets over the past year. Because of the demand in
franchise, the government has to regulate franchises by implementing strict rules and regulations
for the protection of the franchisor, franchisee, and the customers.

After choosing a franchise and meeting with the franchisor, the next steps in statutory
requirements must be followed. First, the disclosure agreement must be followed. The FASA
Code of Ethics and Business Practices requirements must be followed and both parties should
agree (Protulis, 2012). It contains all the details about franchisee and franchisor obligations, all
traceable information about the franchise, criminal and civil actions, details of qualifications,
financial projections, underlying business transactions, and other details.

The similarities of the franchising laws in the Philippines and South Africa are: franchisors
need to comply with the requirements and standards and franchisees must agree with the
disclosure documents and franchise agreements (Strachan, 2016); there is a strict policy in the
implementation of the laws and both parties are subject to investigation and arrest if the authority
finds out that there is a violation of the law; and lastly, there are associations and bodies that
protect both the franchisors and franchisees, and the customers. The franchising laws in South
Africa and the Philippines are almost similar and there are only some few changes.

In South Africa, most foreign franchisors prefer to enter the country by way of master
franchise agreements or, in some cases, area development franchises. The first key difference of
franchising laws in the Philippines and South Africa is that some franchisors in South Africa enter
into joint ventures with local parties due to the imperatives of complying with black economic
empowerment legislation. This is particularly relevant in the case of organizations that wish to do
business with the South African Government. The second difference between the two are the
regulatory bodies. In South Africa, the regulatory authority responsible for enforcing franchising
laws and requirements include the Consumer Protection Act (CPA), the FASA Code of Ethics,
and Franchise Industry Ombudsman (FIO) (Visser, 2015). In the Philippines, the regulatory bodies
include the Department of Trade and Industry, Philippine Franchise Association (PFA), and the
Securities and Exchange Commission (SEC) (Business Franchise, 2016). Lastly, in South Africa,
there are no requirements for franchisors to be registered with any IP registry or other body before
setting up a franchise. However, In the Philippines, franchises must be registered first in SEC by
the franchisor before selling it to the franchisees (Adams, 2016).

Reference:
Adams. (2016). Disclosure Document. Retrieved July 9, 2017, from
https://whichfranchise.co.za/disclosure-document/

Business Franchise. (2016). Franchising in the Philippines. Retrieved July 9, 2017, from
http://www.businessfranchisephilippines.info/requirements/dti-requirements-and-laws-for-
business-franchising-in-the-philippines/

Courtney, S. (2016). South African franchise brands. Retrieved July 9, 2017, from
http://www.franchisedirect.co.za/information/southafricanfranchisebrands/?r=5619

Protulis, A. (2012). Relevant Legislation and Rules Governing Franchise Transactions. Retrieved
July 9, 2017, from https://iclg.com/practice-areas/franchise/franchise-2017/south-
africa#chaptercontent14

Strachan, H. (2016). South Africa Legal Implications. Retrieved July 9, 2017, from
https://whichfranchise.co.za/legal-implications-franchising-south-africa/

Visser, L. (2015). Franchising in South Africa: overview. Retrieved July 9, 2017, from
https://uk.practicallaw.thomsonreuters.com/8-632-22bhusk