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ARTICLE · 03 OCTOBER 2013

Disclosure Is Compulsory

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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.

South AfricaCorporate/Commercial Law
Eugene Honey
Eugene Honey
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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.

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:

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