Buying a Franchise in South Africa: Marketing Fund Checks

A recognised brand can attract customers, but maintaining that visibility costs money. Before joining South Africa’s franchise community, establish exactly how the brand’s marketing fund works. A monthly levy is not simply another operating expense: it is a continuing commitment to a shared budget whose priorities you may not control. Assess that commitment before signing, rather than waiting until your first campaign disappoints.

1. Establish what you must pay

Ask for the franchise agreement, marketing fund rules and any relevant policies incorporated into the agreement. Read them together: a headline levy may not describe your full advertising commitment.

Build a schedule covering:

• The shared marketing contribution: whether it is a fixed amount, a percentage of turnover or calculated another way.
• The calculation base: how turnover treats VAT, refunds, discounts, delivery charges and sales through third-party platforms.
• Local advertising: any minimum spending required in addition to the shared levy.
• Opening campaigns: launch costs, required materials and who approves them.
• Other charges: website services, digital listings, creative work or campaign contributions billed separately.

Check payment dates and whether VAT is added to quoted charges. If contributions can increase, identify who decides, what limits apply and how much notice you receive.

Ask your accountant to model the combined commitment against your own projected sales. A turnover-based levy can remain payable even when the outlet makes a loss. Keep it separate from royalties so you can see the cost of marketing clearly.

2. Understand the South African legal baseline

South Africa specifically regulates franchise agreements through the Consumer Protection Act 68 of 2008 (CPA) and its Regulations. This is not merely a matter of voluntary membership rules within the franchise community.

Section 7 requires franchise agreements to be in writing and signed by or on behalf of the franchisee. They must include prescribed information and satisfy the plain-language requirements of section 22.

Regulation 2 addresses the required contents of franchise agreements, including details of advertising or marketing funds and contributions. Where the agreement provides for such a fund, it must address the provision of financial statements reflecting the fund’s receipts and expenditure. Treat a vague promise that “head office handles marketing” as insufficient detail for your review.

Regulation 3 also requires the franchisor to provide a dated disclosure document, signed by an authorised officer, at least 14 days before the franchise agreement is signed. Use that review period to compare the marketing obligations in the proposed contract with the information supplied during the sales process.

Section 48 prohibits unfair, unreasonable or unjust terms. However, dissatisfaction with a campaign does not automatically make a levy unlawful or give you permission to stop paying. Ask a South African franchise lawyer to assess unclear obligations, reporting provisions and any proposed changes before you commit.

3. Test how the fund is managed

Request the latest available fund financial statements, the current marketing plan and an explanation of budget approval. For a new fund without a spending history, request its proposed budget and reporting arrangements instead. Distinguish clearly between established practice and future promises.

Your questions should address four points:

Permitted spending. Does the fund pay for customer advertising, brand research, agency fees, staff costs or other activities? Ask specifically whether recruiting new franchisees is funded from contributions and where that is authorised.

Administration and related parties. Establish whether the franchisor charges management fees or uses an agency connected to its owners. Ask how charges are approved and disclosed. A connected supplier is not automatically unsuitable, but its role should be transparent.

Participation. Do franchisor-owned outlets contribute on the same basis? How are unpaid contributions handled, and do shortfalls reduce the available campaign budget?

Balances and accountability. What happens to unspent money? Can the fund borrow against future contributions? Who reviews the accounts, and how can franchisees raise questions?

Do not assume that financial reporting gives you voting rights or that your contribution must be spent near your outlet. Establish the actual contractual arrangements.

4. Check what your outlet can realistically expect

Shared marketing often builds awareness across the network rather than generating an equal number of enquiries for every outlet. Ask how the franchisor balances national visibility with local customer acquisition.

Request examples of campaign objectives and reporting: geographic reach, website enquiries, promotional redemptions or other relevant measures. Avoid treating impressions or social media followers as proof of profitable sales.

Clarify who controls local social media accounts, approves advertisements and pays for promotional discounts. If you must run a national offer, model both the marketing contribution and its effect on your margin.

Record important assurances in the agreed documents. A salesperson’s promise of dedicated local spending is not a substitute for a clear contractual commitment.

Practical takeaway: Before signing, obtain a complete contribution schedule, clear spending rules and documented reporting arrangements. Proceed only when you understand both what you must pay and how the shared fund will be accountable.