Establishing When A Franchise is Actually A Franchise – 'If it Looks Like A Duck, Smells Like A Duck and Quacks Like A Duck, it is Usually A Duck'

• Jurisdiction: South Africa
• Date: 25 May 2019
• Citation: (2010) 22 SA Merc LJ 12
• Published date: 25 May 2019
• Pages: 12-26
• Author: Tanya Woker

Establishing When A Franchiseis Actually A

Franchise – ‘If it Looks Like ADuck, Smells

Like ADuck and Quacks Like ADuck, it is

Usually A Duck’*

TANYA WOKER**

University of KwaZulu-Natal

1 Introduction

For some time now there have been calls for the introduction of legislation to

regulate the franchise relationship.

1

At one stage it was expected that the

legislature would introduce franchise-specif‌ic legislation, but the Department of

Trade and Industry (DTI) has chosen to bring franchising within the ambit of the

Consumer Protection Act.

2

The Act will have huge implications for the franchise sector. Franchisees

will be regarded as consumers and franchisors will be suppliers. The

consumer protection measures as set out in the Act will therefore apply to

franchising where appropriate.

3

No doubt there are those who will seek

to avoid the implications of the legislation by ensuring (or attempting to

ensure) that their method of doing business does not qualify as a franchise in

terms of the Act. Consequently, the f‌irst important issue to decide is: when

*United American Karate Inc unreported decision, Index Number 404446/97 (Sup Ct NY City

October 261998) transcript of hearing at 78, quoted by DJ Kaufmann ‘New York FranchiseAct’

Understanding Franchising: Business and Legal Issues (2001) at 231.

** BALLB LLM (Natal) PhD (Rhodes). Professor, Faculty of Law, University of KwaZulu-Natal

(Durban).

1

In 2000 a review of the regulatory environment was conducted by the Franchise Steering

Committee (FSC), a committee established for this purpose by the Department of Trade and Industry.Its

aim was to formulate recommendations for a more effective regulatory framework for franchising.

Following consultation with various stakeholders in the sector a strategy document was produced. This

document was intended to provide guidance to the Government in its attempts to develop and regulate

the sector (‘National Strategy for the Development and Support of Franchising in South Africa’(2000)).

A Draft South African Franchise Bill was prepared in 2002 but this legislation has not been

implemented. Freek Potgieter, a previous executive member and legal advisor of the Franchise

Association of South Africa, assisted with the drafting of the legislation and he informed a conference

held in Johannesburg in May 2004 that legislation would be in place before the end of that year. See

‘Franchising Law on the Way’Business Day (6 May 2004) and Tanya Woker ‘Franchising – The Need

for Legislation’ (2005) 17 SA Merc LJ 49.

2

Act 68 of 2008. The Act is expected to become fully operational in October 2010. The extra time is

needed to establish the Consumer Commission and prepare the Regulations.

3

By its nature, consumer protection legislation is designed to deal with problems that ordinary

consumers face in the marketplace. The legislation is really designed to deal with matters such as

purchasing fridges or motor vehicles, contracting to have carpets cleaned, entering into gym or cellular

telephone contracts, purchasing timeshare, travel tickets, vacation or other similar services. This means

that the provisions of the Act are more suited to dealing with ordinary,everyday consumer transactions

than the (far more complicated) investment in a business system. See Woker op cit note 1 where it is

argued that franchising is a unique business model that should be governed by its own rules and

regulations and not by rules devised to deal with other issues.

12

(2010) 22 SA Merc LJ 12

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