Starting a Franchise in South Africa

A business that has set out its systems and procedures, and is trading profitably, may choose to start a franchise. Successful franchising is difficult but if you want to expand your business to its’ maximum size and profitability, you may wish to franchise your business. If you are the franchisor you may benefit from additional profits and you may retain control over your business system. Becoming a franchisor is an expensive venture and you will need a franchise attorney and a franchise consultant to handle all intellectual property matters, including trademarks and copyright, as well as licensing and franchise agreements.

How to Franchise your Business…

  • It is if utmost importance to register the franchise trade name and trademark, logo and slogan with the help of a specialist trademark attorney.
  • The next step would be to open a second or third outlet. Having multiple operating stores will help you learn more about the types of locations, procedures and advertising suitable for your business. This will also develop your track record giving your company credibility.
  • Create specific structures for every aspect of your business system because this is what you are selling as a franchisor, a working business structure that guarantees success.
  • Put together a very training program for new franchisees. The franchisee must know your systems and procedures. Franchising is all about sticking to the same system.
  • You will have to setup all the legal documents required to start a franchise, including franchise agreements and licensing with your specialist franchise attorney.
  • Prepare a Disclosure Document. The Disclosure Document should typically contain the company history, owners and officers’ backgrounds, required investment breakdown, financial statements, main aspects in the franchise agreement, existing franchisee’s information, and litigation history.
  • The contents of franchise agreements, as well as Disclosure Documents are now regulated in terms of the Consumer Protection Act and the Regulations published under this act. Compliance with the aforesaid legislation is compulsory. Each and every franchisor would be well advised to ensure that its franchise documentation complies with all applicable legislation.
  • Continue finding new ways to help the franchise be more profitable. Send newsletters, give additional training at no cost to the franchisee, hold regular conventions and recognize outstanding franchisee performances by giving awards. A happy franchisee means a happy customer.
  • Your franchising aim is to sell franchises in large numbers. Nothing happens until franchises are sold.

Starting a franchise is not easy or cheap. There are a number of requirements you will have to meet. You will be required to prepare franchise documentation, including a Disclosure Document, Franchise Agreement and Operational Manual for your franchise operation. You will need an experienced franchise attorney to help you meet the legal requirements. Be sure to check the experience and references of the attorneys when making this selection. You will have to prepare audited financial statements for the franchise company. You’ll need an experienced franchise accountant to produce these audited statements and to advise you on the structure of your business. Be sure to check the experience and references of the accountants when making this selection. You have to document the systems that a franchisee will use to run their business successfully, as well as a training program that will teach the new franchisee know to become a successful operator. You will have to formalize the marketing plans that a new franchisee will use to drive customers into their new store as well as a sales system that you can use to recruit new franchisees. You can hire franchise consultants to assist with this, but make sure you check references very carefully.

Advice and Services

Smit & Van Wyk, Inc. legal services include drafting franchise agreements and franchise licenses. We also provide professional advice on how to start a new franchise, and buying from an existing franchise corporation.

More information about Franchise Law:

Franchising – Franchising means the licensing of a franchisor’s business model to a franchisee. The franchisor appoints franchisees to expand its business by means of separate and individual franchise outlets. The franchisor’s success will depend on the success of the franchisees as well.

Franchising in South Africa – When the franchisor grants licensing rights to a franchisee to use the franchise business system. The franchisor will remain the owner of all intellectual property rights surrounding the business system.

Franchise Operations Manual – A franchise operations manual is the primary document that governs the day to day franchise procedures and operational requirements. The manual should be specify in detail the procedures with which franchisees should comply in order to operate their franchise business.

Franchising Legal Advise – Franchise law is specialised and differs from other areas of law, thus you need find yourself an attorney that specialises in this specific type of law. Franchise attorneys represent the franchisor, as well as the franchisee. Smit & Van Wyk, Inc. specialist franchise attorneys  provide both franchisors and franchisees assistance and legal advice.

Franchise Attorneys – Esmari Jonker is an Attorney of the High Court of South Africa with more than 16 years experience with franchise agreements (franchise contracts), litigation and intellectual property. She acts on behalf of local as well as international clients in the franchise industry.

Buying a Franchise – Rather than starting your own business, you can purchase an established successful business franchise. Buying a franchise has it’s advantages and disadvantages, but it is at least a path to self employment. Before you invest, make sure you do a lot of investigating and preparation.

Starting a Franchise – A business that has set out its systems and procedures, and is trading profitably, may choose to start a franchise. Successful franchising is difficult but if you want to expand your business to its’ maximum size and profitability, you may wish to franchise your business. If you are the franchisor you may benefit from additional profits and you may retain control over your business system.

Franchise Agreements – Are you a business owner and want to start franchising, or do you want to purchase a franchise from an existing organization? Regardless, if you are entering a franchise relationship, you will need a franchise attorney to setup the franchise agreements and other legal documents. The franchise relationship between a franchisor and franchisee will mostly be controlled and governed by a franchise agreement.

Franchise Attorneys – How a franchise agreement is setup depends on the type of franchise. Each franchise agreement will have provisions that include royalty payments, franchise location, design, products, operations, insurance, and duration.

Franchise Agreements in South Africa – Principles like fixed pricing structures and the definition of exclusive franchisee territories are contrary to the provisions in the Competition Act. Similarly, principles like restrictive purchase conditions are contrary to the provisions in the Consumer Protection Act.

About the Franchise Agreement – A franchise agreement is in essence not defined in separate category of law, but is governed by existing law of contracts.  More specifically, a franchise agreement is a licence agreement whereby certain intellectual property is licensed by a franchisor to a franchisee.