Labour Law Overhaul Franchisee

Great news for franchises across South Africa: A recent ruling by the Labour Appeal Court will help remove potential labour obstacles. According to Imraan Mahomed, head of employment at law firm Routledge Modise, the Labour Appeal Court has overturned the ruling of the Labour Court and franchise agreements are no longer affected by section 197 of the Labour Relations Act (LRA).

Out with the old
Prior to this ruling, new franchise outlet owners may have had to take on employees of a previous franchisee that occupied the same or nearby premises and served the same clientele on the pretext that the new owner had acquired the previous owner's business. "The previous laws meant that a new franchise business might be saddled with an overhead and a workforce not of its choosing and possibly unsuitable for the needs of the business. These franchise owners would then have to go through often lengthy labour processes, making it difficult to build momentum as a small business," says Ian Jacobsberg, franchising law specialist at Routledge Modise.

In with the new
Now, the unique nature of a franchise arrangement is taken into consideration: "The fact that every franchise outlet is governed by a new agreement between the business owner and the franchisor means that unless the new franchisee purchased the business from a previous owner, it is a separate undertaking and should not be forced to inherit the obligations of a previous franchisee," says Jacobsberg.

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