Franchise disclosure documents through the lens of the CPA and the Regulations
Authors Lynn Biggs
Affiliations: Lecturer, Mercantile Law Department, Nelson Mandela University
Source: South African Mercantile Law Journal, Volume 29 Issue 2, 2017, p. 219 – 239
The promulgation of the Consumer Protection Act 68 of 2008 and Consumer Protection Regulations has resulted in the introduction of the right to disclosure of information for franchisees and the obligation to disclose information on the part of franchisors in terms of section 7 and regulations 2 and 3. The article examines whether and to what extent regulation 3 provides clarity regarding the information to be disclosed. Regulation 3 requires that every franchisor must provide a prospective franchisee with a disclosure document and lists the type of information the disclosure document must contain. It is submitted that regulation 3 contributes to overcoming lack of pre-disclosure and formal regulation experienced in franchise relationships in the past. However, the wording of regulation 3 requires clarification. This article proposes amendments to some of the provisions of regulation 3, with the aim to further enhance the disclosure requirements. The article furthermore identifies and examines concerns regarding the confidentiality of the information contained in the disclosure document especially during the negotiation stages and the section 7(2) cooling-off period. The signature of a confidentiality agreement is proposed as a solution to overcoming these concerns.