- within Immigration, Transport, Media, Telecoms, IT and Entertainment topic(s)
On 26 June 2026, the Competition Commission (the “Commission") gazetted updated draft Terms of Reference for comment in relation to an inquiry into the South African Franchise market (the “Franchise Market Inquiry").
According to the Draft Terms of Reference, the South African franchise landscape comprises more than 800 franchisor brands, over 3,500 franchisees, and upwards of 30,000 outlets across the country. South Africa is ranked second globally in terms of franchising’s contribution to national economic output and is the only emerging market among the top five in this regard. Data from the Franchise Association of South Africa’s (“FASA”) 2023 database indicates that fast food and quick-service restaurants represent the single largest franchise category at 19%, with retail following at 17%.
FASA estimates that the sector generated turnover of roughly ZAR999 billion in 2023, amounting to approximately 15% of South Africa's total GDP of ZAR6,660 billion in 2022. Employment within the franchise industry is estimated at around 500,000 people, representing about 5% of the national workforce. Research by Sanlam and FASA suggests that 85% of franchise concepts operating locally are South African in origin and have export potential.
The Commission indicates that the aim of the inquiry is to assess whether certain market features are impeding, distorting or restricting competition in the franchise sector, hindering the entry, growth and meaningful participation of small and medium enterprises ("SMEs”) in franchise ownership and operations, or negatively affecting the increased ownership of franchise businesses by historically disadvantaged persons ("HDPs").
The Commission notes that SME involvement in franchising, and HDP participation in particular, remains disproportionately low. FASA's 2023 independent franchise survey indicates that white-owned businesses hold 57% of franchise outlets, while African ownership stands at just 18%, Indian ownership at 17% and Coloured ownership at 8%. The Commission observes that outlet ownership tends to be concentrated among wealthy and highly educated individuals, leaving the most disadvantaged groups in society (notably women and young entrepreneurs with skills but limited capital) with constrained access to franchising opportunities.
The Commission notes that franchisee complaints lodged with it highlight a power imbalance between franchisors and franchisees, coupled with difficulties in negotiating fair contractual terms. Furthermore, the Commission has identified a notable uptick in franchise-related mergers and acquisitions.
The Franchise Market Inquiry is intended to focus on three broad themes:
- Franchise finance, funding and related conditions: this will cover qualification criteria, application procedures, and the scope for more innovative funding mechanisms that could lower the upfront capital burden on prospective franchisees.
- Terms, conditions and practices in franchise agreements: the Commission will examine the nature and competitive effects of franchise agreements, the degree of standardisation across franchisees, and the rationale for any differential treatment.
- Exploitation of information asymmetries: the inquiry will involve an evaluation of whether franchisors misrepresent the value of their outlets and considering measures to strengthen transparency and informed decision-making by franchisees.
The Commission has signalled that the inquiry is likely to focus on sectors considered to have the greatest bearing on market dynamics, namely fast food (fast food restaurants chains), construction (construction and hardware stores), automotive (automotive stores offering parts and car service such as brake pads exchange, wheel bearing, wheels change), grocery (grocery stores), fuel stations (grocery and fast-food stores located within the fuel station) and health and beauty (health and beauty stores).
Interested parties are invited to submit comments on the draft Terms of Reference by no later than 16:00 on 7 August 2026. The inquiry itself will formally commence 20 business days after the final Terms of Reference are published, and the Commission is statutorily required to deliver its final report within 18 months of that date.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]