The Franchise Association of South Africa (FASA) has noted with interest the final report by the Competition Commission on the Online Intermediation Platforms Market Inquiry (OIPMI) which was launched after it suspected some online platforms were restricting competition specifically in relation to small and medium enterprises, as well as historically disadvantaged people who competed in these markets.

Of interest to the franchising sector are the following OIPMI findings and recommendations;

- The findings relate to local delivery platforms Uber Eats and Mr D Food competing with the bigger players and facing restrictions on restaurant franchises listing with them and are disadvantaged by the lack of transparency on menu surcharges on and across platforms. Independent restaurants lack negotiating power with Uber Eats and Mr D Food resulting in higher commission fees than the restaurant chains, forcing them to push up prices to consumers, and less choice in trading off service levels for fees.  

- The recommendations, according to the OIPMI findings, are something that Uber Eats has already started to experiment with. Mr D Food must achieve the same outcome through implementing a promotional rebate on the commission fee which can be used for discounts and promotions on Mr D Food, along with advertising credits. They must both also inform consumers periodically that pricing may differ from in-restaurant menus due to those commission fees. 

Maria D’Amico of Thomson Wilks Incorporated and Chair of FASA, commenting on the OIPMI findings, points out “that the OIPMI recommendations are not automatically binding on the public and that the government will consider them and it will be up to them to implement the recommendations through legislation or regulatory measures – and only then will it become binding on the South African public.”

FASA is acutely aware of the wide ramifications of the food delivery conundrum as in the same year (2021) that the OIPM inquiry was launched by the Competition Commission, then Chairperson Elect (now Chair) of FASA and franchise attorney Maria D’Amico and franchise stalwart Eric Parker of Franchising Plus raised their concerns not only on the lack of transparency on menu surcharges across platforms but also on the impact of VAT and Royalty payments within the franchise business structure.

According to Eric Parker, Director at franchise consultancy Franchising Plus, “for many franchises, at the height of the Covid restrictions, building on or introducing take-out and delivery options was a lifeline and the difference between having to close your doors or eking out an existence until things improved.” Whilst that was definitely a silver lining to the pandemic and opened up a new revenue stream, the fly in the ointment (or should it be the sauce) was the impact of delivery service charges on the balance sheet and more particularly how franchise royalties/management service fees would be affected by a third-party delivery service.

Whilst those are allied issues specific to franchising on a legal, operational and financial basis, the introduction of third-party delivery services caught many franchisors by surprise and many brands took advantage of the major players in the food delivery space that offered aggressive promotions and subsidised deliveries. “As most fast food and restaurant franchise brands have franchisees countrywide, it is probable that they would be signed onto the leading platforms in restaurant food delivery,” says Maria. “One of the OIPMI recommendations is that the restaurant chains are no longer allowed to restrict their franchisees from listing local delivery platforms of their choice. The remedial action of this (according to OIPMI) is greater visibility and opportunity for smaller South African platforms to acquire customers through Google Search, enabling growth and greater platform competition with larger, sometimes global rivals.”

In line with the sentiment expressed by the Competition Commission for companies in that space to introduce HDP programmes that provide black-owned businesses a package of assistance to onboard and promote visibility on their platforms and for government to establish a start-up fund for black digital entrepreneurs, FASA has been investigating options in the food service delivery platforms under the ambit of their empowerment mandate.

Empowering, transparent & fair solutions

To this end, FASA is presently in negotiations with Akata Mobility to develop an exclusive on-demand and scalable mobile marketplace app for the FASA franchise network. Their OnOurWay system will be customised and used as and how the businesses need it and serve two major functions:

• Order Pickups – Food, packages, documents & more.
• Driver Booking & Management – to be able to manage their own drivers and deliveries with one easy system.

Alwyn Steenkamp, CEO of Akata Holdings has welcomed the findings of the Competition Commission in relation to its Online Intermediation Platforms Market Inquiry Report. Cognisant of the challenges outlined in the report, its Road Warriors movement uses technology and mobility to create a sustainable and equitable future for businesses, customer and delivery drivers alike. Aligned with Environmental, Social & Governance (ESG) principles and United Nations Sustainable Development Goals (SDGs), they are committed to reducing the environmental impact, promoting social welfare and upholding the highest standards of governance in their operations.

“Solving the challenges faced by local businesses due to restrictions preventing them from using local delivery platforms and to counteract the lack of transparency regarding commission fees charged by national platforms, Road Warriors are changing this narrative by offering game-changing solutions that empower local businesses to take full control of their delivery services by utilizing the platform’s skilled and reliable delivery drivers while conducting transactions through their own apps or call centres. Fixed, flat delivery fees that are both transparent and affordable ensure businesses can optimize their expenses while providing a competitive edge.”

Their Driver Packages aim to provide current and new drivers the opportunity to gain access to all the tools they need to be successful at their jobs. By providing fair wages, benefits and a supportive work environment, embracing ethical practices is not just a responsibility but a way to foster a more responsible and reliable delivery ecosystem that benefits everyone involved.

According to Fred Makgato, CEO of FASA “this prospective partnership with Akata Mobility is important because it will assist in streamlining the delivery space, giving stability and safety and above all job opportunities to thousands of drivers who would service the over 38 000 franchisees operating around the country.”