Draft ToR Flags Competition Concerns in South Africa’s Franchising Sector

Key aspects of the ToR are as follows:

Background and rationale

The draft ToR notes that franchising is a significant feature of the South African economy, with more than 800 franchisor brands, over 3,500 franchisees and approximately 30,000 franchise outlets.

Data referenced in the draft ToR estimates 2023 franchise industry turnover as representing approximately 15% of the country’s GDP, and approximately 5% of total employment (employing about 500,000 people).

The draft ToR sets out several market features which, in the Commission’s preliminary view, may impede, distort or restrict competition or hinder participation in the franchise sector, including:

• observed lower levels of entry and participation by small and medium enterprises (SMEs) and historically disadvantaged persons (HDPs) in franchise ownership;
• perceived power imbalances between franchisors and franchisees;
• concentration through acquisitions in certain sectors;
• funding requirements and upfront capital contributions;
• franchise agreement terms and conditions; and
• information asymmetries.

Proposed scope

The stated purpose of the inquiry is to assess whether there are market features that:(i) impede, distort or restrict competition in the franchise sector;(ii) hinder entry, growth or meaningful participation of SMEs in owning and operating franchise businesses; and(iii) negatively affect increased ownership of franchise businesses by HDPs.

The inquiry is proposed to focus on three broad themes:

• finance, funding and related terms and conditions;
• franchise agreement terms, conditions and practices; and
• exploitation of information asymmetries.

Under each of these themes, the inquiry will assess, among other things, the requirements set by creditors and/ or franchisors for access to franchise finance; the nature and impact of franchise agreement terms and related practices on competition and participation; and the extent to which information asymmetries may affect franchisees’ ability to make informed decisions.

The inquiry notes that the draft ToR represent initial parameters and are not exhaustive; additional or related matters may arise during the inquiry, and amendments may be made under section 43B(5) of the Act.

Who is affected

The inquiry encompasses the franchise sector broadly. Franchise businesses operate across a wide range of sectors, including fast food and quick service restaurants, retail, construction, automotive products and services, grocery, fuel stations, health and beauty, childcare education and training, agriculture, mining, and manufacturing.

Taking inspiration from other jurisdictions where complaints have been raised in relation to particular sectors, the Commission indicates that, while its concerns extend across all franchise sectors, it may concentrate on sectors with greater potential to influence market dynamics.

The inquiry is likely to be relevant to franchisors, franchisees, prospective franchisees, creditors and financiers, industry associations, and any other parties with an interest in the franchise sector.

Next steps

The public is invited to submit written comments on the draft ToR by 4pm on 7 August 2026.

Following review of submissions, the Commission will publish the final ToR. Guidelines for participation and details of administrative phases will be made available on the Commission’s website following publication of the final ToR.

The inquiry will formally commence 20 business days after publication of the final ToR and is to be completed within 18 months in accordance with the statutory requirements.

On completion, the Commission will publish a report in the Government Gazette and submit its final report to the Minister of Trade, Industry and Competition.