Intellectual property is the foundation of franchising. The basis of a successful franchise lies in the fact that the franchisor has developed distinctive products and services, unique methods of marketing and presenting them and a reputation connected to those products and services, from which other people want to benefit. Much of the value of the franchisor’s intellectual property lies precisely in the fact that access to it is restricted to the franchisor and its network of franchisees; entrepreneurs wanting to benefit from it must sign up as franchisees. The franchisor generates its income from the fees paid by franchisees.
It is therefore entirely understandable that franchisors would want to protect their intellectual property from unauthorised use by, amongst others, former franchisees who, having been exposed to and trained in the franchisor’s valuable business methods and trade secrets, look to exploit them for their own benefit after the franchise agreement has ended.
However, through a long line of decided High Court cases, this has proved extremely challenging, with the courts in the vast majority of cases having refused to enforce the restraint. The most recent example, A Plus Students (Pty) Ltd v Amanda Herbst, in which judgment was handed down on 26 February 2026, is no exception, and demonstrates the difficulties franchisors face.
The restraints that the franchisor was attempting to enforce were contained in two clauses, reading as follows –
- “Upon the termination of this agreement, the Franchisee will not gain any monetary value from advising or teaching math calculation methods by means of the system of operating the product of education of Japanese Soroban (Abacus) Mental Arithmetic (the ‘Japanese Model’), including the use of abacus and mental computation methods to teach the skill of fast and accurate math calculation, for a period of thirty six (36) months after the termination of this agreement, and for the Territory of South Africa and SADC countries as set out in 1.14”.
- “The franchisee hereto undertakes and agree, that it will not participate, own, manage, either by agency, representation or family connections, compete with the franchisor in any manner or form relating to a max educational entity irrespective of the mythology [sic] or any such like, pertaining to the training of individuals”.
The principles on which the courts approach cases in which they are asked to enforce restraints are well settled and do not need to be revisited in detail, save to put in context the principal lessons from the judgment for franchisors and their legal advisers.
In summary, the principles on which the enforceability of a restraint will be assessed are:
- Does a party have an interest that deserves protection after termination of the agreement?
- If so, is that interest threatened by the other party?
- In that case, does that interest outweigh the other party’s interest not to be economically inactive or unproductive?
- Does public policy, independently of the relationship between the parties, require the restraint to be upheld?
- Is the restraint necessary to protect the applicant’s interests, or does it go further than is necessary?
Analysing the evidence, the Court noted the following flaws in the case the franchisor had presented:
- The franchisor had alleged that the former franchisee was using or exploiting the franchisor’s confidential information and trade secrets in the new business in which she was involved. However, the franchisor had not given any details of what the confidential information and trade secrets comprised. It has also not given any details of how and if the former franchisee’s business was using or exploiting its confidential information;
- The restraint clause prohibited the former franchisee from competing with the franchisor. The court pointed the often-overlooked point that, in general, a franchisor does not itself carry on the business carried on by its franchisees, but instead grants franchisees the right to carry on that business, and benefits commercially from granting that right. The business the former franchisee was carrying on may have competed with the franchisor’s franchisees, but not with the franchisor itself;
- The geographical area covered by the restraint included 16 countries with a combined area of over 11 million km² and a combined population of over 300 million people. The franchisor had not provided any evidence to show that its protectable interests extended throughout the area and had not even suggested a smaller area over which its interests did extend.
The judgment in this case is instructive for franchisors and their legal advisers, when drafting restraint clauses in franchise agreements and when enforcing them in court. The following points should be noted –
- Because the court has to balance the interests of both parties, it will interpret the restraint strictly and will not extend it to apply to any situation that does not fit the literal interpretation of the words used;
- Franchisors must be careful to consider what situations the restraint is meant to cover and drafters to ensure that the literal meaning of the words covers those situations but goes no further than that is necessary to cover them. This would relate to the restricted activities, the period for which the restraint applies and the area in which it operates;
- Because most proceedings to enforce restraints are brought by way of applications, the papers filed on behalf of the franchisor must state explicitly: 1) the terms of the restraint; 2) the confidential information or other interests referred to in the restraint that the franchisor is trying to protect; 3) the former franchisee’s conduct and how it infringes the restraint; and 4) why the restraint is necessary, and goes no further than necessary, to protect the franchisor’s interest.
