The effect of the consumer protection act on franchise agreements

Abstract

This dissertation discusses the influence of the Consumer Protection Act No 68 of 2008, the “CPA”, on franchise arguments. It is argued that the provisions of the CPA will lead to the consequences of restoring equality between a franchisee and a franchisor. A franchise agreement is viewed as an ordinary commercial contract, governed by the same legal principles as any other contract. In reality franchising is in fact far beyond a simple contract; it is also used as a governing system. The franchisors create structures whereby their franchisees can be controlled. In order to manage franchisee opportunism such as the unauthorized use of intellectual property and addressing under-performance, an inherent power imbalance was present in favour of franchisors. The CPA introduced certain provisions that address the relationship between franchisors and franchisees by prescribing and controlling the rights and obligations of the parties. As a result, a fair structure is created to regulate the franchise relationship between the parties. The promulgation of the CPA is welcomed by this study and it is submitted that the country’s economy as a whole can only benefit from it.