Latest draft of new franchise law in South Africa due out by summer

08 January 2008

The South African government is currently preparing a third draft of its Consumer Protection Bill (the "Bill") which is likely to be made public in July 2008. The Bill is intended to preserve the welfare of consumers but in doing so proposes franchise specific regulation be introduced into South African law.

The previous draft of the Bill, contains various regulations that would be detrimental to the South African franchise industry if not revised in the forthcoming final draft. One particular provision that has caused concern is a potential right of franchisees to terminate their agreement on 20 business days written notice.

However, it seems more likely that this was an unintentional drafting error by the South African Department of Trade and Industry (the "DTI") rather than an attempt to provide such a harsh restriction on franchisors. Having been lobbied by franchise industry groups, the DTI has revealed that the final draft of the Bill will contain new regulations addressing the franchising industry's concerns.

Given the current trends in global franchise legislation we would expect that the primary franchise related requirements of the final Bill will be the provision of pre-contractual disclosure information and the creation of more equitable termination rights. We would not expect the final Bill to have a significant detrimental affect on franchising within South Africa but it is likely that there would be penalties for any non-compliance.

If you would like further information on how your South African franchise agreements or template agreements can be adapted once the final Bill is published then please contact Mark Abell, Babette Märzheuser-Wood or Will Parsloe.