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Franchise dream shattered

By unknown | Oct 08, 2008 | COMMENTS [ 0 ]

The exploitation endured by franchisees at the hands of unscrupulous franchisors is near its end.

The exploitation endured by franchisees at the hands of unscrupulous franchisors is near its end.

Consumers such as Kenneth Ngubeni, who claims he was a victim of franchisor Nicholas da Souza of Old Style Fish and Chips, whom he says breached his contract but then penalised him, will soon be fully protected by the Consumer Protection Act.

In March this year Ngubeni wanted to get into the franchising business. He contacted Da Souza, who offered him an outlet - either on Gandhi Square or at the Carlton Centre in Joburg.

Da Souza demanded a downpayment of R100000, which Ngubeni and his partner deposited into his account.

"Da Souza insisted that I pay the money to show my commitment," Ngubeni said.

But Ngubeni's R100000 did not ensure that he got the place he wanted.

Da Souza tried to get finance for Ngubeni from Nedbank, but later told him he would have to get finance elsewhere because he was no longer doing business with Nedbank.

Ngubeni said Da Souza accused Nedbank of being too slow.

"But we found out that Nedbank declined to finance us because the operation was not registered with the Franchise Association of South Africa (Fasa)," Ngubeni said.

He said after accepting his money Da Souza gave him many contradictory excuses about why he could not get a shop on Gandhi Square or at the Carlton Centre.

"He gave us a list of new premises, such as Primrose, Germiston, which I did not like," Ngubeni said.

He then decided to cancel the deal and demanded his money back. But Da Souza took a cancellation fee of R10000.

"Da Souza refused to refund my money in full because l cancelled and also because my partner was blacklisted," Ngubeni said.

"He should have screened us before accepting our deposit."

Da Souza said he had to recover his costs from Ngubeni.

"I had no reason to penalise Ngubeni and his partner," Da Souza said. "They were the ones who failed to come up with the necessary finance - and they led me on when they agreed that I should find them alternative premises."

He admitted he was not registered with Fasa but insisted he abided by the ethical rules it set out.

Patrick Deale, a director at getclosure, said a franchisee had very limited protection through a voluntary code of conduct.

The good news for franchisees, Deale said, is that the Consumer Protection Bill expands on the conventional definition of consumer to include franchisees.

This means that on the whole franchisees will have additional, legally enforceable rights when the bill is passed into law.

The bill outlines what the requirements are for franchise agreements. Among other stipulations they have to be in writing and signed by, or on behalf of, the franchisee.


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