You will find a more detailed context in our analysis of the Court of Appeal`s decision. Modern operates a network of office maintenance franchises. The franchisor`s business model operates on what is called a three-way model. First, Modern signs a maintenance contract with a customer. Modern then transfers the agreement to one of its franchisees, with the customer`s consent, to enable the franchisee to provide the services required by the maintenance contract. However, the assignment of the contract is imperfect as Modern remains responsible for the performance of the obligations under the maintenance contract. While they believe that the preparation of a franchise publication document (FDD) is costly and that compliance with disclosure legislation is laboriously legalmumbo-jumbo, nothing compares to the costs associated with legal actions for withdrawal from the franchise agreement initiated by angry franchisees who want all their money back. The crosser may prefer this relationship, because they have less responsibility, and some degree of control, because the transfer option is exactly that – an option to accept the lease, not an obligation. This can save the franchisor considerable costs if a franchisee defaults and the franchisor does not want to take over the site. However, it is precisely for this reason that some landlords may object to the award option relationship, as they are less confident that someone is acting from that location and paying rent if something happens with the franchised tenant.
The tripartite financing contract is for those who are generally young and inexperienced with a reduced credit score and who do not have the necessary cash contribution. Potential franchisees benefit from a reduction in own contributions and minimum guarantee requirements (20%), a five-year repayment period at the dominant policy rates, a committed franchise business manager and a free two-day accredited financial management course. Those who do not have a guarantee for the investment will have access to the financing with the help of Nedbank. Franchisees invest a basic R12,000 deposit in cash instead of the R550,000 standard. The balance of the entire facility is funded by Nedbank, which includes working capital. Brimstone will provide assurance of part of the franchisee`s commitment.