In a landmark franchise case judge rules franchiser used a Hartbeespoort store to ‘test’ new branding. A Pretoria man has won a six-year court battle against a paint retailing franchise after the Pretoria High Court ruled that the franchiser had unfairly sold him a store that looked nothing like the well known paint brand’s other outlets.
STEPHEN TIMM | CITY PRESS
Former franchisee Musa Modzuka is tomorrow expected to apply to the court for a preferential court date to make his case for the R6.8 million in damages he is seeking from Midas Earthcote Paints, for “serious financial losses” he suffered when his franchise agreement was cancelled.
However, Midas Earthcote Paints’ attorney Mark Nixon, of Mark W Nixon Attorneys, said his client would be filing a notice for leave to appeal within 15 working days of the judgment.
In a ruling handed down by the Pretoria High Court, Judge Tati Makgoka ruled that Midas Earthcote Paints had sold Modzuka branding for the Hartbeespoort outlet he and his late wife Hillary had bought in March 2005, that was not consistent with the franchiser’s other stores.
His was one of only two stores in the country to which the franchiser had applied the new branding.
However, the public were not alerted to the new branding.
Initially, Midas Earthcote Paints lodged a claim against Modzuka for breach of the franchise agreement, which the franchisers terminated in 2006, arguing that he owed a large sum in unpaid stock.
Modzuka then lodged a counterclaim against the paint retailers alleging that the signage and branding of his outlet was so different from that of the brand’s other outlets that customers began questioning whether the paint he was selling was really Earthcote and Midas.
Modzuka said the name, the colour of the signboard and the size of the letters were all different to those of the franchiser’s other stores. He says this caused him to suffer large financial losses.
Franchises are easily recognisable by their uniform branding and this is part of their attraction to those that buy into the model and is often a key reason for their
Added to this, Modzuka’s store was not listed on Earthcote’s website along with its 25 other outlets. His store was also left out of an advert run in a magazine at the time.
Judge Makgoka said it appeared that his store has been “used as a pilot” to test the public’s perception of new-look signage.
However, he noted that the franchiser had acted in good faith as the signage had been changed because of the development of the franchise as a business.
Modzuka, who has spent hundreds of thousands of rands defending the six-year case and has since started his own law firm, says he hasn’t completely dismissed the idea of venturing into franchising again.
The Franchise Association of South Africa (Fasa) as well as other franchising experts City Press spoke to said they weren’t aware of any recent cases between franchisees and franchisers which were similar to those concerning Modzuka’s issue of rebranding.
Eugene Honey of Adams and Adams attorneys pointed out that franchisers often don’t make public any intention to rebrand outlets and that rebranding is often carried out on a phase-by-phase basis, linked to the renewal of the franchise agreement.
He advised franchisees to conduct a thorough investigation of the franchiser and to ensure that franchisers have a disclosure document in place in compliance with the Consumer Protection Act, before they sign any franchise agreement.