Franchising is about…ethical business practices
In franchising there are always unscrupulous entrepreneurs who, under the guise of franchising, will make empty promises and sell unethical businesses to unsuspecting business operators.
One of the first questions you need to ask is…
“Is the franchise I am considering joining accredited by the Franchise Association of South Africa? And if not – why not?”
- FASA members voluntarily align themselves and their brands to an internationally recognized body that adheres not only to international best practices but to sound business ethics established through the Consumer Protection Act and FASA’s government approved Franchise Industry Code and possible Ombudsman for the sector.
- The fact that a franchisor that is a FASA member voluntarily opens himself, his company and his operations to scrutiny shows his commitment to running his operation ethically and along sound business principles.
- FASA members are viewed as credible operators and quality companies within the franchise community and more likely to be accredited by the major banks and lending institutions.
FASA makes a thorough assessment of each applicant company before membership is granted. This would typically include a look at the viability of the concept and that the company has a pilot operation operating for at least a year as well as the presence of appropriate franchise documentation.
The three pillars of a good franchise system cover all the bases to a well-run business format. The first two – the Disclosure Document and the Franchise Agreement pertain to the legal and moral side of the business you’re buying, the Operations Manual is the blueprint on how that business should and must be run.
The Disclosure Document
As a precursor to signing the agreement to purchase a franchise, FASA and the Consumer Protection Act requires its members to give a Disclosure Document to prospective franchisees that gives all the relevant information about the company and the franchise opportunity. This would include the company’s track record and details of directors and key executives; a description of the franchise and financial data on the franchisor backed by a certificate from auditor/accountant; confirmation of directors on viability of the system and cooling off period, termination/renewal/goodwill and assignment of agreement terms; the number of existing franchisees and their success rates; the initial investment required, details of ongoing payments due, total investment required and financial information about pilot operations; details on training and support guaranteed to the franchise as well as their assistance in selecting/approval and setting up of sites.
The Franchise Agreement
The franchise agreement is the legal contract which sets out the arrangement between the person buying the franchise (the franchisee) and the person selling it (the franchisor). Among other things, it sets out the rights and obligations of both parties, defines the length of time the arrangement will last, stipulates the territory, if any granted to the franchisee, and details the costs involved and how they are to be calculated. The contract should also state the level and support and training you should receive and set out any restrictions on equipment and suppliers. It should also set out the terms and conditions under which the contract can be terminated and under which the franchise can be sold.
The Operations Manual
Although the franchise industry is possibly the only one that puts great emphasis on a written operations manual, all businesses should base their success – knowingly or unknowingly on a blueprint of how the business should run. In short, there cannot be a structured business without an Operations Manual and no business can ever truly assume itself consistent, structured and organized without one. Today, it is an established fact that for the successful growth of any business, but particularly of a franchised business, the Operations Manual is a critical reference tool for outlining procedures and standards in the business operating systems.
Use these guidelines when investing in a franchise and remember FASA members have committed to ethical franchising!
Visit our website to learn more about franchising and also to view all FASA members.
To protect, lobby, promote and develop ethical franchising across all sectors in South Africa with specific focus on transformation.
