Competition Market Inquiry: Franchising

On 26 June 2026, the South African Competition Commission (Commission) published draft terms of reference for a proposed market inquiry into the South African franchise sector (Franchise Market Inquiry). Interested parties have been invited to submit comments on the draft terms of reference (ToR) by 16h00 on 7 August 2026, after which the Commission will publish final ToR and formally commence the Inquiry. 

The significance of the Franchise Market Inquiry lies in the fact that franchising is not confined to one discrete market, but stretches across numerous industries including fast food, grocery retail, fuel station forecourts, automotive services, construction and hardware, and health and beauty businesses, with potential implications for consumers, small, medium and micro-enterprises (SMMEs), businesses owned by historically disadvantaged persons (HDPs) and established national brands alike. 

The Commission notes that franchising has a significant economic footprint in South Africa, with the draft ToR recording that there are more than 800 active franchisor brands, more than 3,500 franchisees and more than 30,000 franchise outlets across the country. It also records the Franchise Association of South Africa’s estimate that the franchise industry generated turnover of approximately ZAR 999 billion in 2023, representing approximately 15% of South Africa’s gross domestic product, and employs approximately 500,000 people.

The Commission’s stated concern is that, notwithstanding the potential for franchising to operate as a pathway into the formal economy for SMMEs and HDPs, access to, participation in and ownership of franchise businesses remain uneven. 

Against that backdrop, the proposed Inquiry will focus on three broad themes: (i) finance, funding requirements and related terms and conditions; (ii) franchise agreement terms, conditions and practices; and (iii) the extent to which information asymmetries between franchisors and franchisees may be exploited. In practical terms, the Commission intends to consider issues such as upfront capital contribution requirements, restrictive supply arrangements, rebates and discounts, pricing and promotional arrangements, franchise fees and royalties, and the adequacy of disclosure to prospective franchisees. 

Market inquiries have become an increasingly important tool in the Commission’s enforcement framework because they allow for a broader evaluation of market dynamics than is typically possible in firm-specific complaint proceedings. Previous market inquiries have considered, among others, the banking, data services, retail, healthcare, liquefied petroleum gas, public passenger transport, grocery retail, online intermediation platform, fresh produce, and media and digital platform sectors. Rather than focusing only on whether a particular firm has contravened a specific provision of the Competition Act, No. 89 of 1998 (as amended) (Competition Act), a market inquiry enables the Commission to assess structural, behavioural and regulatory features of a market and to consider whether those features impede, restrict or distort competition.

This broader framing is particularly important in the franchising context. Many of the issues identified in the draft ToR arise from the nature of the franchisor-franchisee relationship itself: the franchisor typically owns the brand and controls key aspects of the operating model, while the franchisee establishes and operates the outlet, bearing certain associated risks and costs. The Commission’s concern is that this relationship may, in certain circumstances, give rise to power imbalances that limit the ability of SMME and HDP franchisees to compete effectively, participate meaningfully and expand within their markets. The central issue is likely to be whether many of the features of typical franchising arrangements are justified by the need to preserve brand consistency and system-wide efficiencies, or whether they operate in a manner that limits franchisee autonomy, reduces intra-brand competition, and raises barriers to entry, expansion and meaningful participation by SMME and HDP franchisees. 

What is novel about the proposed Franchise Market Inquiry is that the subject of the Inquiry is ostensibly a type of business model (i.e., franchising), which is utilised in many different sectors and markets, rather than the features of a specific market.  It remains to be seen whether this is a valid and effective use of such powers by the Commission.

The proposed Franchise Market Inquiry will be conducted under the amended market inquiry provisions in Chapter 4A of the Competition Act. Following the 2018 amendments, the Act requires the Commission, in a market inquiry, to decide whether any feature of a relevant market impedes, restricts or distorts competition and, if it finds an adverse effect on competition, to determine what action may be taken to remedy, mitigate or prevent that effect. The Act further provides that remedial action must be reasonable and practicable, having regard to factors including the nature and extent of the adverse effect on competition, the nature and extent of the remedy, the relationship between the adverse effect and the remedy, the likely effect of the remedy on competition, and the availability of less restrictive means.

The precise outer limits of those remedial powers have attracted significant debate, particularly following the Online Intermediation Platforms Market Inquiry where questions arose as to whether the Commission may impose prescriptive remedial action directly on market participants. While there has been some judicial clarification in relation to the specific process to be followed when the Commission considers divestment to be the appropriate remedy, the broader scope of the Commission’s remedial powers under the amended market inquiry provisions remains untested before the courts.

The Franchise Market Inquiry should therefore be watched closely. It sits at the intersection of several themes that have become central to South African competition enforcement: concentration, market access, SMME participation, HDP ownership, buyer-supplier power dynamics and the design of proportionate remedies in the context of market inquiries. It will also provide a further indication of how the Commission intends to use its amended market inquiry powers in circumstances where the issues identified are not confined to a single firm’s conduct, but arise from broader market structures and commercial practices. 

For franchisors, franchisees, funders and other stakeholders in the franchise ecosystem, the publication of the draft ToR is an early opportunity to engage with the scope of the Inquiry. As described above, the sectoral focus identified by the Commission is extensive, covering fast food restaurant chains, construction and hardware stores, automotive stores offering parts and car services, grocery stores, retail offerings located at fuel stations, and health and beauty stores. The eventual Inquiry may therefore have implications across a wide range of consumer-facing businesses in South Africa.

More broadly, the Franchise Market Inquiry confirms that market inquiries remain a central part of the Commission’s enforcement strategy, particularly where competition concerns may arise from broader market structures, commercial practices and patterns of participation rather than isolated instances of firm-specific conduct.