There is just over a week left before the 7 August deadline for comment on the Competition Commission’s draft terms of reference for a franchise market inquiry (FMI) is reached.

Daily Maverick reports that the commission is investigating features of the SA franchise sector that may impede, distort or restrict competition.

Its rationale for the FMI is driven by complaints that franchisors are failing to pass on supplier discounts, insisting on non-negotiable pricing, and providing misleading financial projections.

Mia de Jager, commercial, real estate, and dispute resolution partner at Adams & Adams, notes that while the commission flags high unencumbered cash requirements as a barrier to entry, franchising inherently mitigates risk for small and medium enterprises: ‘We do need to acknowledge that there are barriers to entry, but in a franchising model, it’s potentially less so than traditional non-franchising businesses.’

Bowmans says the vast scope of the inquiry, which spans multiple sectors from fast food to healthcare and agriculture, aligns with the commission’s preliminary view that there are perceived power imbalances between franchisors and franchisees, pointing out that the commission is specifically targeting concentration through acquisitions, upfront capital contributions and restrictive agreement terms.

Full Daily Maverick report