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Franchisee Advice

The Ins And Outs Of Digital Contracts

Contracting in the digital age through electronic contracts.

Monisha Prem

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The use of technology in law has impacted the way we do business. Electronic contracts, in particular, have become more common, and this initially caused great uncertainty as to how and whether they could be recognised as valid and enforceable agreements.

The passing of the Electronic Communications and Transactions Act (ECT Act) in 2002 initiated the basic understanding that digital communications are just as valid as paper based communications. According to section 11(1) of the ECT Act, information is not without legal force and effect merely on the grounds that it is wholly or partly in the form of a data message.

It is now possible to contract by means of data messages and parties may even sign agreements using digital signatures.

What you Need to Know about Digital Contracts

The basics are in place: Electronic contracts must meet the common law requirements of contracts in order to be valid and enforceable. The minimum requirements for a valid contract under South African law include a valid offer and acceptance; or consensus between the parties. All contracting parties must have contractual capacity.

For example, a minor does not have sufficient capacity to enter into a contract without assistance or consent of their guardian.

The contract must be legal, and be capable of performance for it to be valid. Finally, formalities are set for certain contracts, such as the sale of land, and must be met for the contract to be enforceable.

Related: What Is The Future Of The Franchise Model?

Some agreements cannot be executed electronically:

In the case of Spring Forest Trading CC v Wilberry t/a Ecowash and Another 2015 (2) SA 118 (SCA), the Court ruled that “…when there are formal requirements of writing and signature imposed by statute or the parties to the transaction, these can generally be satisfied through electronic transactions. There are, however, exceptions where agreements may not be generated electronically. These are the agreements for the sale of immovable property, wills, bills of exchange and stamp duties.” Consequently, most agreements (except those listed above) can be concluded electronically by data messages.

Email and SMS:

In the case of Jafta v Ezemvelo KZN Wildlife 2008 JOL 22096 (LC), the Court held that “(E)-mails and smses and the language of text messages they carry may seem informal, but treating them as having no legal effect would be a mistake.” It is thus possible, in terms of the ECT Act and case law, for a contract to be concluded, varied and cancelled by email or SMS.

Businesses should take note of this and consider excluding the right to vary or cancel an agreement by way of electronic communication in some instances. Staff should also be made aware of the risks and consequences of emails and SMSs, particularly when dealing with contractual provisions.

Time and place of conclusion:

The time and place of conclusion of contracts are important as they relate to jurisdiction and applicable law. The ECT Act adopts the reception theory for receipt of electronic communication, meaning that contracts are formed at the time when, and place where, the offeror receives acceptance of the offer, but acceptance of the offer does not have to come to the knowledge of the offeror for a contract to arise. This theory prevents any disadvantage to the offeree by not knowing when the offeror knows about the acceptance.

When clicking on ‘I accept’ or ‘I agree’ on a website that offers goods for sale, a contract is concluded. However, this acceptance of the offer may not come to the attention of the seller if the thing sold is packaged and delivered automatically or through a dispatch service.

Therefore, an email or SMS will be regarded as having been received even if the addressee has no knowledge of it being in his inbox. The data message merely has to have the capability of being retrieved.

Related: The Legal Requirements For Your Business’ LifeStage

Digital signatures:

The ECT Act defines an electronic signature as data attached to, incorporated in, or logically associated with other data and intended by the user to serve as a signature. This may include things such as typing your name at the end of an SMS or email or clicking on an icon on a website to confirm your acceptance of terms and conditions.

Should a contract require something to be ‘signed’, the requirement would be met if the mark inserted into the document or data message is capable of demonstrating the intent of the signatory to authenticate the document.

In conclusion

In a technologically advancing era, businesses are relying on electronic communication to a greater extent. It is now possible to enter into agreements (including their amendments or notices thereunder) not only through email, but through other data messages such as SMSs. In light of the above, businesses should consider whether there are steps that can be taken to protect themselves and avoid dispute.

Monisha is a corporate advisor, admitted attorney at M. Prem Inc, and author with over 14 years deal-making experience. Monisha litigated for several years before joining an investment banking firm specialising in mergers and acquisitions. Monisha has owned and operated several businesses, is passionate about business development, commercial and corporate law.

Franchisee Advice

What To Know About Franchising Your Business

For many businesses, franchising is an excellent route to growth, opening up new opportunities and markets. Laurette Pienaar, National Franchise Manager at Nedbank, unpacks why it’s worth considering this route.

Nadine Todd

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Vital Stats

  • Player: Laurette Pienaar
  • Position: National Franchise Manager
  • Company: Nedbank Limited
  • Visit: nedbank.co.za

What type of business is ideally suited to the franchise model?

Franchising has been proven successful across all industries, including the automotive, food, entertainment and retail industries. However, several key qualities ultimately determine a concept’s ability to successfully become a franchise.

Firstly, the business model must be scalable and able to be repeated in several locations. Secondly, there must be demand for the products sold and, thirdly, the franchise model must be proven as profitable.

Related: (Infographic) 7 Digital Marketing Strategies For Franchises

Why is franchising a good growth option?

Franchising is often used as a cost-effective growth strategy for businesses. A key benefit of this strategy is that no capital layout is required for a new franchised store as opposed to corporate-owned stores.

Franchised stores are also proven to be more successful than corporate-owned stores. This is mainly due to the fact that the franchise owners have a vested interest in the store, whereas corporate stores are supervised by a manager. Franchising is therefore also a great way to build your brand.

What should business owners focus on?

Franchisors should set up good infrastructure to support their franchisees, including good upfront and ongoing training to both the franchisees and their staff, the correct legal advice and assistance, and a strong operational team to assist franchisees daily.

Many successful franchisors provide support by expanding through vertical integration, which provides franchisees with logistics, supply chain security and product consistency.

Several franchisors advocate a structure with both franchisee and corporate-owned stores. This enables a franchisor to keep in touch with the daily challenges franchisees experience and new products and solutions can be tested at a corporate store before being rolled out to the franchise network.

How can franchising consultants assist business owners?

Franchise consultants provide daily operational support to franchisees. They are responsible for daily store visits to assist with quality checks, process flows, supplier relationships and, often, financial assessments. They are a helpful soundboard on any improvements to be made in the business model and can convey suggestions to the franchisor.

Related: The Secret Sauce To Great Franchise Leadership

What challenges should business owners be aware of?

Businesses looking to franchise need to ensure that their business is teachable to others. Overcomplicated products and systems may deter franchisees from investing in your brand.

Franchisors have to do ongoing introspection regarding their company culture. For example, does the culture promote innovation and inspire franchisees and consumers, which ultimately is a culture worth investing in?

New franchisors’ selection criteria for franchisees are often not sufficiently thorough and comprehensive. For a new franchisor, it is important to choose good quality franchisees and to have strict selection criteria to ensure that your brand remains reputable and stable during fast-expanding cycles.

What lessons can be learnt from SA’s successful franchises?

Businesses looking to expand through franchising should consider setting up several corporate-owned stores first. This assures potential investors that your business is based on a proven model with a track record and supportive infrastructure.

There is not always a one-size-fits-all model. Many franchisors have created custom models to accommodate and adjust to the need of a specific property or consumer market. A great example of this would be the food industry where many franchisors offer shopping centre concepts, drive thrus and kiosk or express concepts. Consider this when developing your model.

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Franchisee Advice

Develop Digital Marketing Competency In 3 Simple Steps

Conquering the digital revolution needn’t be daunting. Polish up your tech skills and watch your digital marketing prowess increase throughout your franchise.

Diana Albertyn

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As a franchisor, digital marketing may be proving to be a challenge due to the unique structuring of the business.

“The very nature of franchises is ‘structured’, however, when it comes to marketing, that structure often lacks,” says Marcela De Vivo, Founder and CEO of Gryffin Media.

Franchisors and franchisees often struggle to reach common ground when looking to achieve different marketing goals. While the franchisor needs to control the brand in its entirety, the franchisee wants to market their business using particular strategies suited to their location.

Research has found that smartphones are the biggest influencers of 82% of users when they make their in-store purchase decisions while. It’s for this reason that the importance of digital marketing for franchises has increased.

Here’s how to harness its power of influence, amplify foot traffic and solidify brand loyalty:

1. Recruit digital natives and early adopters

As much as you’re the leader of your franchise network, there are franchisees in your chain you could learn from. The global increase in millennial franchise owners means it is highly likely that you’ll be able to identify early digital adopters within your franchise network.

“The best people to learn from are those who have been in your shoes before,” says Matt Forman of the Franchise Centre at Griffith University.

“Encourage and support their efforts and use them as case studies to demonstrate to the rest of your franchisees the value of digital marketing, and how to do it right.”

2. Invest in training your team

“Each digital competency level requires more education and resources in order to integrate digital marketing with your physical stores,” says Forman. For this reason, regularly investing in continuous training for your team so as to ensure they keep abreast of any new and emerging trends.

Proactivity and adapting to the constantly evolving digital landscape led KFC to open a LinkedIn account for its founder and mascot Colonel Sanders. KFC’s out of the box tactic is a fresh approach to what has long been considered a B2B platform, under-utilised as a B2C platform.

3. Apply custom targeting techniques

The discovery of new and small businesses is being fuelled by Google searches, social media and online reviews, making these platforms a goldmine of invaluable tools.

Leveraging certain custom targeting techniques like easily searchable keywords and exposure on other reputable and high-traffic websites, gives your franchise’s digital marketing efforts a boost. This results in an effective campaign, favourable reviews and meaningful and lasting interactions with consumers “whether it’s a reply to a Facebook comment or a retweet,” says Entrepreneur’s Emily Conklin.

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Franchisee Advice

How To Hire Skilled Workers For Your Franchise

Your staff run your business – you just have to show them how. This is why employing the best people for the job is essential.

Diana Albertyn

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According to the Franchise Association of South Africa (FASA) 2017 Franchisor Survey, one of the main challenges facing franchisees is finding the right staff.

“Staffing your franchise can be one of the most challenging parts of running a successful business. Without a great team of employees, you cannot run your business effectively,” says Saxon Marsden-Huggins, founder of WebRover.

These three tips could help you find the best employees for your franchise outlet:

1. Don’t hire in haste

While you may be rearing to go and keen to fill gaps to speed up profitability, research your candidates thoroughly.

Related: Insights On Recruitment That Could Affect Franchise Performance

As the job applications keep flowing into your inbox, keep in mind that not all of them qualify for the positions available – it may even be a small percent who are actually viable candidates. This is why your hiring process should include:

  • Taking the time to thoroughly screen CVs to develop a short list
  • Creating a carefully crafted list of interview questions
  • Setting aside adequate time for thorough interviews
  • Getting to know the candidates through a second round of interviews to confirm your choice.

Giving the hiring process dedication and attention will ensure you get the cream of the crop, contributing to the long-term success of your franchise.

2. Demonstrate support in the workplace

While you can instil the necessary skills into new recruits, it’s difficult to train for culture. This is why choosing the right employees from the beginning will make the rest of your franchise management system will run more smoothly.

“The manner by which you run the franchise will influence employee perceptions of the brand as well,” says Hireology’s Erin Borgerson. “Your staff must become ambassadors of your franchise system to attract the target consumer market.”

The best way to do this is encouraging staff to give you their honest feedback. Your commitment to creating and upholding a positive culture will result in increased loyalty from your current staff and a superior pool of applicants.

Related: 3 Things You Should Consider Before Buying Your First Franchise

3. Offer appealing incentives

When advancement opportunities are clearly communicated, staff is keen to hear how they can get there, as they have career goals of their own. Encouraging this ambition will draw good employees to your franchise.

“Helping employees understand the steps to advancement helps them to view their current job as an important part of a career with an upward path, not just a pay cheque for this week,” say financial reporting technology experts at Qvinci.

Performance bonuses and employee benefits incentivise staff’s efforts, therefore increasing their income alongside the profit of the business. “This serves to make employees a part of the business and not merely people ‘who work there’,” they explain.

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