24 October 2025
Galito’s Mobile (Pty) Ltd v Tetz Investment (Pty) Ltd and Others, High Court (Limpopo Division), (unreported) 22 October 2025 tested the enforceability of restraint of trade clauses in a franchise agreement after a franchise relationship broke down. The court dismissed the franchisor’s bid to prevent former associates from operating as a competitor brand, because they were not parties to the franchise contract and no unlawful competition was proven.
What happened
Galito’s, a national quick-service chicken franchisor, terminated a franchise with Tetz Investment in February 2025 after a period of non-compliance. A new company, Lehumo Rise (Pty) Ltd, later operated a Barcelos outlet at the same filling station site. Lehumo Rise allegedly shared a director with the now de-registered franchisee, Tetz Investment. Galito’s sought to enforce a restraint up to 27 February 2026 within a 10 km radius, covering conduct that directly or indirectly competes with Galito’s.
The franchise agreement sought to restrain “any person to whom the franchisee or any of the sureties is related, whether by blood or by marriage, or any entity or other business concern with whom the franchisee or any of the sureties is directly or indirectly associated by common or substantially similar ownership, management or directorship or where the ownership, management of directorship are substantially controlled by the same group of companies or relatives”.
The franchisor argued the restraint extended to “related persons/entities,” even though Lehumo Rise and the individual were not signatories nor sureties to the original franchise agreement. They also alleged unlawful competition and sought broad interdictory relief.
The Court’s decision
The High Court dismissed the application with costs. It held that non-parties cannot be bound by a contract’s restraint clause, absent consent or an implied agreement. The franchisee’s former associates had not signed the franchise agreement nor a suretyship.
The court found insufficient evidence of unlawful competition or protectable exclusive trading rights that would justify an interdict. It underscored that South African law protects free competition and will not support unwarranted exclusivity through overreaching restraints.
The result is a clear warning: if you want a restraint enforced, ensure the right parties are bound and the restraint is proportionate and defensible.
Key legal principles
Restraints of trade are enforceable only when they protect legitimate business interests, such as goodwill, confidential information, and know‑how and are reasonable in time, place, persons and the activities they restrict. In franchising, those interests can be real and valuable, but courts are quick to strike down or narrow restraints that go further than justified.
An attempt to broadly restrain various affiliated persons, who are not signatories to an agreement (which is common in franchise agreements), will not be enforceable against those parties without their explicit or implied consent.
Why this case matters for your business
The decision stresses disciplined drafting and execution: identify and bind the correct parties (including individuals and related entities, where lawful), justify the restraint scope with evidence, and ensure CPA‑compliant disclosures.
The decision shows that overbroad or unclear restraints may not be enforceable, especially where the franchisor has not tied the clause to genuine protectable interests.
Commercial risk cuts both ways: too broad and you risk unenforceability; too narrow and you leave your brand, know‑how, and local goodwill exposed.
Practical takeaways
Design restraint duration and geography to align to the real market footprint and the competitive threat around the outlet. Tie the restraint to specific, protectable interests such as local goodwill, proprietary recipes or systems, training, investment, and confidential data.
Do a proper due diligence on a franchisee and their ownership structure so that relevant parties are identified and informed of the restraint.
Plan exit scenarios at the start: draft proportionate post‑termination restraints for non-renewal or termination that align with the operational reality of the franchise.
Consider narrower, targeted tools like non‑solicitation and confidentiality obligations to protect what truly matters, without overreaching.
Recommendation
This case is a timely reminder that an enforceable franchise agreement that protects your interests as a franchisor depends on reasonableness, clarity, and CPA compliance.
If you operate or are considering a franchise, now is the time to review your restraint clauses and CPA compliance. Speak to a specialist franchise and competition law adviser before you sign, renew, exit or enforce.