When a client is interested in starting or buying a franchise, a franchise attorney is required to setup the franchise agreement as well as other legal documentation. Franchise law is governed in terms of common law principles in South Africa and across most African states. As the common law principles can differ in different jurisdictions, it is necessary to obtain advice from attorneys that are able to advise clients in relation to a particular jurisdiction. The franchise relationship between a franchisor and franchisee will mostly be controlled and governed by the franchise agreement and operations manual. Smit & Van Wyk offers the following franchising services:
- Franchise agreements;
- Licensing agreements;
- Advice on all legal aspects when starting a franchise;
- Advice on all the legal aspects when buying a franchise;
- Dispute resolution services; and
- Advice on the Consumer Protection Act.
These documents should typically specify the manner and method of operations, business system requirements, supplier details, advertising specifications, insurance required and the franchise duration. There will be provisions in the contract that will have a direct impact on how the business is run. It is important to establish what the franchise and royalty fees will entail. The franchise fee is an up-front, once off fee charged at the beginning of the process. The franchise fee will be due when the franchise agreement is signed. Royalties are continuing fees that are paid to the franchisor on a weekly, monthly or quarterly basis, as long as the franchise agreement is in place. Royalty fees are tied to the sale of products or services. Royalties often cover elements such as ongoing training, updates to manuals, advertising and promotions. Smit & Van Wyk has assisted franchises in various industries including the food and beverage; travel; stationary; furniture; fitness and spa; personal care services and cleaning industries to name a few. Smit & Van Wyk is an accredited legal service provider and member of the Franchise Association of South Africa (FASA).
The process when starting a franchise includes:
- Registering the franchise trade name and trademark, logo and slogan.
- Opening a second or third outlet. Having multiple operating stores will provide information regarding the types of locations, procedures and advertising suitable for the business. It will also provide credibility to the business.
- Creating specific structures for every aspect of the business system.
- Creating a training program for new franchisees with regards to systems and procedures.
- Preparing legal documents including franchise agreements and licensing agreements, with the assistance of a franchise attorney.
- Preparing an operations manual.
- Preparing a disclosure document. The disclosure document should typically contain the: company history, owners and officers’ backgrounds, required investment breakdown, financial statements, principal aspects in the franchise agreement, existing franchisee’s information and litigation history.
- Ensuring compliance with the Consumer Protection Act.
- Ensuring success of franchisees by continually providing training and advertising assistance etc.
When buying a franchise, it is important to determine:
- What the nature of the business is;
- The location of the franchise store;
- The success of the franchise concept;
- Whether the franchise is financially successful;
- Local and national competition;
- The public’s perception of the franchise;
- Levels of initial and ongoing costs;
- How much training and support is offered; and
- Conditions and restrictions in the franchise agreement
Smit & Van Wyk provides a full range of Intellectual Property legal services in all African countries where protection is available. We can provide information on the filing requirements in each of the African countries and can also offer information on the various regional IP organisations such as ARIPO, OAPI and the Madrid protocol. We work with a network of trusted and knowledgeable agents to develop the best possible solution to each of our clients’ needs for trademarks, designs and patents in Africa.