It is not as simple as it would seem to launch a franchise. It is a concept that can be abused and therefore necessitates a lot of collaboration between the franchisor and the franchisees. A franchise is a business whereby the owner licenses its operations along with its products, branding, and knowledge in exchange for a franchise fee. In Nigeria, there are several local and international franchises. Mr. Biggs, Chicken republic, and NNPC are good examples of local franchises in Nigeria. KFC, Domino’s pizza, Cold Stone, Shoprite, Krispy Kreme, and SPAR are all examples of international Franchises in Nigeria. In this article, we would give a brief guide on how to start a franchise in Nigeria.
A STEP-BY-STEP GUIDE
First and foremost, to start a franchise in Nigeria, one will need to first register its business with the Corporate Affairs Commission. The Companies and Allied Matters Act, 2020 provides that any person who intends to carry on business in Nigeria must first of all register their business for that purpose. Similarly, where the business owners are foreigners, the Immigration Act 2015 and the Nigeria Investment Promotion Commission Act further provide that non-nationals must ensure that it registers their business with the Nigeria Investment Promotion Commission and obtains a business permit to be able to carry on business in Nigeria. If the newly registered company would be employing foreigners, it will need to apply for an Expatriate Quota as provided for in Section 34 of the Immigration Act (highlight my previous article on how to get an expatriate quota).
Furthermore, to start a franchise in Nigeria, one has to also register the franchise agreement with the National Office for Technology Acquisition and Promotion (NOTAP). By the provisions of the NOTAP Act[i], all agreements for the transfer of technology between a foreign transferor and a Nigerian transferee must be registered with NOTAP. As a franchise agreement involves the transfer of technology, it is required to be registered with NOTAP. For all intent and purposes, agreements for the transfer of foreign technology shall be registrable if its purpose or intent is in the opinion of NOTAP wholly or partially in connection with any of the following;
- The use of the trademark
- The right to use patented inventions
- The supply of technical expertise
- Supply of basic or detailed engineering
- Supply of machinery and plant
- The provision of operating staff or managerial assistance and training of personnel
It is pertinent to note here that in registering a franchise agreement, the Federal Competition and Consumer Act (FCCPA) provides that any provision in an agreement for the sale of goods that tends to establish minimum prices for the resale of goods in Nigeria shall be void.
In addition, a company that intends to start a franchise in Nigeria will also need to have its trademark registered in Nigeria. Nigeria is the first to file jurisdiction so for any mark to be protected, it will need to be registered in Nigeria regardless of the same mark being registered in other jurisdictions.
In conclusion, in addition to the aforementioned, a franchisee will also need to secure a lease agreement for the franchise store in a suitable location, employ local staff, register the franchise company with the Federal inland Revenue Service (FIRS) for tax purposes, register for some industry-specific permits. For instance, a franchise that intends to operate in the Oil and gas sector must amongst other things obtain a license from the Department of Petroleum Resources (DPR).
[i] Section 4(d) National Office for Technology Acquisition and Promotion Act, LFN Cap N62
Written by Olawaunmi Ojo for The Trusted Advisors
Email us: [email protected]