THE new Consumer Protection Act grants franchisees substantial new rights, but poses challenges for franchisors, Candice Meyer, a partner at Webber Wentzel, says.

Meyer says the regulations would necessitate the review of business processes and re-drafting of franchise agreements to ensure compliance.

The act required businesses to be more open about contracts. Failure to comply with the act and regulations could result in penalties of up to 10percent of turnover and potential civil damages, Meyer warns.

Franchise agreements were subject to cooling-off periods, where a franchisee could walk away from a contract within 10 days of signing it with no cost or penalty.

"Of great concern to franchisors will be the protection of intellectual property and proprietary information that franchisees may receive in terms of the agreement prior to expiry of the cooling-off period," Meyer says.

Franchisors should amend their activities, agreements and processes to ensure compliance with the act, she adds.