Crackdown on Chicken Licken, KFC, Pick n Pay, SPAR, and Sorbet in South Africa

The Competition Commission has signalled its intention to launch a market inquiry into South Africa’s franchise sector.

This could herald a significant shift for the local franchising landscape, with these types of inquiries typically leading to binding, remedial actions, including forced changes to long-standing corporate business models.

This is feedback from Werksmans Attorneys’ Paul Coetser and Kwanele Diniso, who outlined what the Competition Commission’s inquiry could mean for local franchisors.

This comes after the Competition Commission published draft Terms of Reference on 26 June signalling its intention to launch an inquiry into the franchise sector.

Coetser and Diniso explained that the market inquiry stems from the commission’s belief that there are market features that may impede, distort, or restrict competition in the South African franchise business market. 

“In addition, the commission has observed a rising number of mergers and acquisitions in well-established franchise sectors, which it says gave rise to concentration in those sectors,” the legal experts said.

Under South Africa’s Competition Act, the commission is empowered to launch a market inquiry if it believes that certain features in a market may impede, distort, or restrict competition within that market. 

“The purpose of the Market Inquiry is to assess whether current franchising models act as a barrier to entry, growth, or expansion for small and medium-sized enterprises and historically disadvantaged persons in the South African economy,” they explained.

South Africa has seen similar inquiries over the past few years into sectors like e-commerce, media and digital platforms, and banking.

For the latest inquiry into the franchise sector, Coetser and Diniso said the commission has highlighted several systemic features within the franchise market.

According to the commission, these features may stifle competition. The watchdog is particularly concerned that participation in the franchising sector is not yet proportional or reflective of the broader demographic landscape of South Africa.

This, Coetser and Diniso explained, could be seen as limiting the sector’s overall impact on economic inclusivity and transformation.

More competition concerns

Coetser and Diniso said the commission is also concerned about unequal power balances between franchisors and franchisees.

The commission has reportedly received numerous complaints that franchisees are subjected to restrictive and potentially exploitative practices by franchisors who exert control over their operations and supply chains.

“Compounding this, franchisees are said to lack bargaining power during the negotiation of franchise agreements, leaving them with little room to negotiate more favourable terms from the outset,” they said.

Another concern surrounds franchise funding requirements imposed by franchisors or credit financiers, including the need for significant upfront capital contributions.

This, the legal experts said, could be seen as limiting who is able to enter the sector in the first place.

“The commission has also flagged franchisors imposing unfair trading terms and conditions on franchisees,” they said.

This includes the exploitation of information asymmetries between franchisors and franchisees, where franchisors’ superior knowledge of the business model and market can be used to the disadvantage of franchisees.

“Accordingly, the market inquiry will examine whether and to what extent the abovementioned features exist and, if so, whether they have an adverse effect on competition in the market,” they said. 

“Franchisors and franchisees should expect probing by the commission into the above features and may be required to respond to one or more written information requests.” 

“They may also be called upon to make oral presentations regarding their businesses at various public and private hearings.”

Coetser and Diniso said the commission further indicates that it may focus the market inquiry on sectors that appear to have greater potential to influence market dynamics. 

“Top South African brands, including Chicken Licken, KFC, Italtile Retail, CTM, Pick n Pay, Spar, Midas and Sorbet, will be under the commission’s microscope,” they said. 

The inquiry will consider sectors ranging from fast food and grocery to automotive services, fuel station convenience outlets, construction and hardware, and health and beauty.

The public is invited to submit comments on the draft terms of reference by 7 August 2026.