Consumer Protection Act Franchise Agreements


If the supplier does not comply with this obligation, it is possible not only to be sued by the consumer, but also to be sanctioned by the competent administrative authority. Indeed, in almost all legal orders, there is an administrative authority to issue infringement procedures, investigate and impose fines39 and, perhaps with greater effect, impose the obligation to publish the details of infringement procedures paid in a public register. Uruguay believes that individuals and corporations can be considered consumers. But it is explicitly stated: „[A person] is not considered a consumer or user who buys, stores, uses or consumes products or services without a thought receiver to integrate them into production, processing or marketing processes.“ 20 Therefore, we believe that it would be difficult for a franchisee to be considered a consumer. As far as the European Union is concerned, the concept of consumer is limited to individuals and companies are not included in this protection scheme. However, since EU legislation functions as a minimum protection standard, Member States can offer wider protection and some countries are in favour of a broader definition of consumer. To be included in the concept of consumer, the individual must make a transaction that is not related to his or her professional activity6. It would therefore be almost impossible for a franchisee to seek protection under the consumer protection regime. The Consumer Protection Act (CPA) has changed the way franchises are implemented, sold and operated since its inception in 2011. The implementation of the CPA has endured some criticism from businesses, but the need for protection for consumers cannot be ignored. Because franchises are often purchased by individual consumers with no business experience, the CPA plays an important role in protecting new franchisees. Marcel Strauss, Executive Director of The Fish and Chip Co., explains how the CPA is changing the way franchises are made.

Although international best practices have for many years required franchisees to be required to terminate the disclosure, this has not yet been imposed by law in South Africa. However, the Franchise Association of South Africa (FASA) has for many years required franchisees to submit a competent agreement, a compliant disclosure document and an operating manual for membership. The provisions of the CPA also contain requirements for publication documents that must be submitted for information to franchisees at least fourteen days prior to signing a franchise agreement.