Franchisors who fail to adhere to the CPA requirements regarding disclosure place their company at a substantial risk and may even find themselves facing stiff fines and/or imprisonment. By Eugene Honey Despite the fact that the Consumer Protection Act (“CPA”) came into operation on or about 1 April 2011, there are still numerous franchisors who have not prepared Disclosure Documents, or who are not furnishing their prospective franchisees with a compliant Disclosure Document.  This clearly places the franchisor at substantial risk. Regulation 3(1) of the CPA stipulates that every franchisor must provide prospective franchisees with a Disclosure Document, dated and signed by an authorized officer of the franchisor, at least 14 days prior to the signing of the Franchise Agreement.  The Disclosure Document should, at a minimum, contain the following: • The number of franchised outlets, • The growth in the franchisor’s turnover, net profit and number of franchised ou...

Craig Shapiro has prepared a useful checklist to guide you in drafting a suitable disclosure document. Although the Franchise Association of South Africa (“FASA”) has for many years required that its franchisor members provide upfront disclosure to prospective franchisees, and even though this is in line with best international practices, this was, as you may be aware, not previously a statutory or legal requirement in South Africa. This changed on 1 April 2011 with the coming into operation of the Consumer Protection Act (“CPA”) in terms of regulation 3 of which every franchisor must provide a prospective franchisee with a compliant disclosure document, at least 14 days prior to the signing of a franchise agreement.   DISCLOSURE DOCUMENT CHECKLIST Every franchisor must provide a prospective franchisee with a disclosure document, dated and signed by an authorised officer of the franchisor, at least 14 days prior to the signing of a franchise agreement. 1.    ...