Competition Commission Launches Inquiry Into SA Franchise Sector

On 26 June 2026 the Competition Commission (Commission) published draft terms of reference (ToR) for a proposed market inquiry into the South African franchise sector (Franchise Market Inquiry). Interested parties have until 16h00 on 7 August 2026 to submit comments before the final ToR is published and the inquiry formally begins. This marks the lates, and arguably most novel exercise of the commission’s market inquiry powers under section 43B of the competition act.

A massive economic footprint

The significance of this inquiry lies in franchising’s sprawling reach. It isn't confined to a single market; it spans fast food, grocery retail, fuel station forecourts, automotive services, construction, hardware and health and beauty.

According to the draft ToR, South Africa features:

• More than 800 active franchisor brands.
• More than 3,500 franchisees.
• More than 30,000 franchise outlets nationwide.

Data from the franchise association of South Africa (FASA) underscores this massive scale. The industry generated roughly ZAR 999 billion in turnover in 2023, which accounts for nearly 15% of South Africa’s GDP and supports approximately 500,000 jobs. Globally, South Africa ranks second in terms of franchising's contribution to national economic output, making it the only emerging market in the top five.

The transformation imperative

Despite franchising's potential to serve as a gateway into the formal economy for small, medium, and micro-enterprises (SMMEs) and historically disadvantaged persons (HDPs), the commission warns that access and ownership remain heavily skewed.

A 2023 FASA survey highlights a stark racial disparity in franchise ownership:

• White ownership: 57%
• African ownership: 18%
• Indian ownership: 17%
• Coloured ownership: 8%

This imbalance is particularly pronounced given that HDPs make up more than 90% of South Africa’s population (African: 81.7%, Coloured: 8.5%, Indian/Asian: 2.6%). The commission views these figures as evidence of structural barriers that hinder meaningful participation by HDPs, making economic transformation a foundational policy driver for the inquiry.

Three primary focus areas

The draft ToR outlines three primary themes that will guide the investigation:

1. Finance and funding:
   Examining funding requirements and their associated terms and conditions. This includes looking into the typical upfront capital contributions required from prospective franchisees (often 50% of the total investment in unencumbered funds).
2. Franchise agreements:
   Reviewing the fairness of agreement terms, conditions, and operational practices, including restrictive supply arrangements.
3. Information asymmetry: 
   nvestigating the exploitation of information gaps between franchisors and both prospective and existing franchisees.

Legal take: why this matters for corporate SA

This inquiry marks a major shift from routine antitrust enforcement toward heavy, systemic market intervention. The commission is directly challenging the established business models that franchisors rely on for risk mitigation and quality control by targeting core commercial mechanics like the 50% unencumbered funding rule and exclusive supply chains.

Corporate legal teams, institutional investors and franchisors need to view this as a clear warning shot. The sector is no longer flying under the regulatory radar. Market participants should use the time before the 7 August 2026 deadline to audit their existing franchise agreements, disclosure practices, and supply networks before these new regulatory parameters begin to reshape the commercial landscape.