Buying a Franchise in South Africa: Product Range Checks

A familiar brand name does not necessarily give you permission to sell everything associated with that brand. Your franchise agreement may authorise only a particular range of goods or services, with additions requiring approval. Before joining South Africa’s franchise community, check whether the offer you are buying includes the activities on which your business plan depends.

1. Establish exactly what you are allowed to sell

Start with a practical question: what will customers be able to buy from your business on opening day? Do not settle for a broad description such as “retail services” or “food outlet”. Ask for the permitted range and any exclusions relevant to your proposed format.

South Africa specifically regulates franchise agreements through the Consumer Protection Act 68 of 2008 (CPA) and its regulations. Regulation 2 requires the agreement to identify and describe the goods or services the franchisee may provide, produce, render or sell. This makes the authorised offer a contractual issue, not simply a merchandising conversation.

Check the agreement alongside any schedules that define your business format. Establish whether you are buying a full-range outlet, a smaller format or a specialist operation with narrower permissions.

Ask questions such as:

• Are all advertised product categories included in this format?
• May the outlet provide installation, repairs or other after-sales services?
• Are seasonal ranges, subscriptions or corporate orders permitted?
• Does any activity require separate approval or an additional agreement?

These are examples to investigate, not rights every franchise automatically includes. Record the answers against the relevant contract wording.

2. Compare the authorised range with your income assumptions

A business plan can look convincing while relying on sales the contract does not authorise. This is especially easy when a buyer uses a larger outlet, a different format or the brand’s national advertising as a guide.

Build a simple comparison with three columns: planned revenue stream, contractual permission and outstanding approval. Include every material activity in your forecast, even if the franchisor’s sales team regards it as an obvious part of the business.

For example, a prospective service franchisee might assume that equipment sales accompany the core service. If the agreement grants only the service activity, those equipment sales should not be treated as secured revenue without clarification.

Ask your accountant to separate income supported by the agreed range from income dependent on future permission. Test whether the business remains viable without the unconfirmed activities.

Regulation 3 requires a dated disclosure document, signed by an authorised officer of the franchisor, at least 14 days before signing the franchise agreement. Use that review period to compare the disclosed opportunity with the actual trading permissions. The statutory minimum is not a reason to sign while important questions remain unanswered.

3. Find out who can change the range

The opening range is only part of the decision. A franchisor may need to update its offer as customer preferences, supply arrangements or brand standards change. Your task is to understand how those decisions will affect your business.

Look for provisions dealing with additions, withdrawals and mandatory participation in new services or product launches. Ask whether the franchisor can require you to stop selling an established line, introduce a replacement or carry a minimum range.

Then examine the practical consequences:

• What notice will you receive before a change takes effect?
• Who bears the cost of stock that can no longer be sold?
• Can existing stock be sold through, returned or credited?
• Will new activities require equipment, qualifications or additional staff?
• Is there a process for considering an outlet’s operational limitations?

Do not assume that compensation, stock returns or an exemption will be available. Ask your solicitor to explain what the contract actually provides and identify any important protection that needs negotiation.

A useful stress test is to consider the withdrawal of a key product category. Would the remaining authorised offer still cover the outlet’s fixed commitments?

4. Agree how local additions will be assessed

You may identify customer demand for something outside the standard range. Before building your plans around that opportunity, establish whether local additions are allowed and how approval works.

Ask who makes the decision, what information an application must include and whether approval can later be withdrawn. Clarify whether a trial authorises permanent sales or only a limited test. Approval to offer something should also be distinguished from any separate regulatory permission needed to supply it lawfully.

Keep a written record of agreed exceptions and have your solicitor ensure they are reflected in enforceable contractual documents. An encouraging discussion is not a substitute for permission consistent with the signed agreement.

Practical takeaway: Before signing, match every major planned revenue stream to an authorised product or service. Resolve gaps, understand the change process and assess the business using the range you can actually sell—not the range you hope to offer.