The Legal Inventory of Franchising in Nigeria

By Paul Elebute
Economic development is an indispensable reality with every modern state. And in pursuit of this all-important phenomenon many pathways can be and indeed have been taken by individuals, companies and governments. These strategies do not exclude Foreign Direct Investment programmes, Public and Private Partnership agreements initiated by the governments all in a bid to foster economic transformation within the state economy. 

Franchising however appears to have been given an all-time low attention by the citizenry. Franchising is one avenue by which economic progress can be facilitated. And statistically, it has not been given a thoroughly maximal attitude by most people in the economy.  Among a plethora of top-notch opportunities that can be seized by developing countries like Nigeria is franchising. It must be given due recognition. 

Franchises exist in some bustling parts of Nigeria. However, relevant law and regulatory policies have not been put in place to ensure the optimum appropriation and monitoring of the emerging goldmine.

Franchise, in a literal sense, actually refers to a permit, authorization or license. But on a technical ground it is important to note that it is called ‘franchise’ and that for commercial purposes. The raison d’être for the adoption of franchising is not far-fetched. Indeed, franchising is sought by many entrepreneurs primarily because of the expensive and time-consuming nature of drawing business plans, deploying marketing strategies and building a viable trust link. All these needs have been well catered for under a workable franchise scheme. 

Other benefits to franchising include avoiding failed business attempts that end up frustrating an entrepreneurial spirit at the beginning as well as on the long run. Areas in which one can navigate successfully in franchise include restaurants, transport, mobile devices, telecommunications, petrol stations, textile and numerous others. These are franchise bases that help prospective franchisees or with connections to local as well as foreign outlets. All one need to ensure is connect to their websites and find out what their requirements are and make one’s decision if the environment designed is favourable.

With a bourgeoning population of nearly two hundred (200) million and the resulting under or non-employment in Nigeria there is a great need to work towards cultivating methods to curb the ugly trend. In Africa, Nigeria is yet the largest destination for Foreign Direct Investment. Recently, the National Bureau of Statistics says the country’s unemployment rate rose from 14.2% to 18.8%. It also maintained that Nigeria’s labour population increased from 83.9 million in the second quarter to 85.1 million in the third quarter of 2017, a difference of 1.2 million in additional workforce. It further stated that total unemployment and underemployment combined increased from 37.2% in the previous quarter to 40.0% in the third quarter.

It must be noted that certain impediments are there to operating a successful franchise scheme. Important and critical issues vis-a-vis franchising actually concerns meeting registration requirements from approved regulatory institutions, harnessing the legal cum intellectual property expertise to achieve compliance as well as management experts who are well-versed in the industry. The only legally approved agency seeing to the registration of franchises in the country presently is National Office for Technology Acquisition and Promotion (NOTAP). Berating the poor state of franchising in the Nigerian economy, Dr. A.O. Okongwu one-time DG of the NOTAP noted that; “International franchisors have not expanded into Nigeria (compared to their expansion into Asia) largely because of ignorance of immense market opportunities in Nigeria and the absence of a franchise-specific legal and regulatory requirement. Against this background, the legal and regulatory mechanism for establishing a franchise in Nigeria would be examined.

Franchise agreements typically involve the licensing of intellectual property (IP) to the franchisee. Trademarks, copyrights, trade secrets, and even patents and know-how may be transferred under a franchising agreement. The NOTAP Act mandates that all agreements for the transfer of foreign technology to Nigerian parties must be registered with NOTAP. The NOTAP Act is triggered whenever there is an agreement having effect in Nigeria for the transfer of foreign technology to Nigerian parties.

In the entire Federation, there is no specific legislation relating to the operations of franchise. Though, franchising as an activity could well be said to have occurred in the country no regulation is directly linked to monitor the legality of the process of franchising. This notwithstanding, several laws and policy statements have gone a long way in affecting franchise in Nigeria. This is to mean that though no arrowhead legal provision relates to franchise, some provisions of some laws nevertheless affect franchising in Nigeria. 

The legal principles that govern contractual and commercial transactions cannot provide an effective regulation for franchising in Nigeria. The dialectics of franchising in Nigeria are actually interlocked by investment laws, competition laws, company laws, intellectual property laws; labour laws, immigration laws and a couple of others.  

Exemplarily, this sort of laws principally include the Company and Allied Matters Act, the Immigration Act Cap 171 LFN 1990; the recent Competition and Consumer Protection Act 2018 (in view); Tax law;  the Investment and Securities Act 2007; the Trade Disputes Act and many relevant others.

Now, it equally needs to be appreciated that some laws having to do with the substantive laws of the major concern of the franchisee/ors would likewise be applicable. For instance, if an entrepreneur seeks to transact under the franchise of an international company majoring in electricity generation, transmission and distribution, no doubt they would have to consider relevant provisions from the Electric Power Sector Reform Act to determine their positions in a manner which is adverse to their legal interests and contractual commitments. So in essence, the laws governing the substantive issue must be acknowledged and duly researched. Ditto, though two different jurisdictions would be involved it would be the jurisdiction of the franchisee in situ.

Moreover, regarding the function, the NOTAP Act provides in clear terms for the regulation of franchise in the country. Indeed, the centerpiece of the functions of the Office was well adumbrated in S.4(d) of the NOTAP Act Cap 273 LFN 1990:

The registration of all contracts or agreements having effect in Nigeria on the date of the coming into force of this Act, and of all contracts and agreements hereafter entered into, for the transfer of foreign technology to Nigerian parties; and without prejudice to the generality of the foregoing, every such contract or agreement shall be so registrable if its purpose of intent is, in the opinion of the National Office, wholly or partially for or in connection with any of the following purposes,

Such purposes are pointedly enunciated in the subsections to relate to the use of trade-marks; the right to use patented inventions; the supply of technical expertise in the form of the preparation of plans, diagrams, operating manuals or any other form of technical assistance of any description whatsoever; the supply of basic or detailed engineering; the supply of machinery and plant, and; the provision of operating staff or managerial assistance and the training of personnel.

Again, it should be noted that no agency is established to regulate franchising in the country, the National Office of Technology Acquisition and Promotion (NOTAP) is playing the front row duty of registering certain technology transfer agreements(so is it dubbed). Other agencies that may become important only become so to the extent that the subject matter of the franchise determines and as a matter of incidence. Thereby, it would be realized as in the illustration given before now if a franchise has electric power as its subject matter then it means the Nigerian Electricity Regulatory Commission would have a proper standing. So also in matters of telecommunications the Nigerian Communications Commission would be relevant, the same also goes for food and pharmaceutical needs the National Agency for Food and Drugs Administration Control would in every way be involved. So while no agency is stricto sensu established it need must be appreciated that other agencies become indispensable for compliance and other related objectives in the event of registration of the franchise. These other agencies may also include the Nigerian Copyrights Commission, The Registrar of Trademarks, Patents and Industrial Design, Federal Ministry of Commerce, the Nigerian Investment Promotion Council and a host of others.
As mentioned earlier, the NOTAP Act simply regulates the legal as well as proper conduct of franchise agreements in the Federation. Its provisions serve as an effective guide to a workable transfer and management of technology arrangement between relevant parties. While the foregoing Act has provided in the average manner it can for franchise regulations in the country, there are palpable lacunae in Nigeria’s supposed legal machinery for franchising. Anti-competitive tendencies, restriction of prices, market dominance and other ignoble practices of franchising appear to have let out a can of worms for the effective legal as well as regulatory framework for the franchise industry. This unbecoming incidence has posed a lot of questions from several quarters, to wit, whether enacting a franchise specific legislation would suffice or would rather be a ‘dis-enabler’ on the long run. The enactment of a competition law is in the pipeline in Nigeria. It is hoped the law would provide valid, workable responses to the challenges and inhibitions to the problem of competition in the franchising country. As an aside, legal issues are not the only issues challenging franchise system in Nigeria. Indeed and apart from legal uncertainties it must be emphasized that many international franchises also take care of the problems of the proper management of their franchises. This is barraged by the worsening economic conditions.

For more about the legal requirements of the operations of NOTAP kindly consult here.


  • Nigeria’s Unemployment Rate Rises from 14.2% to 18.8%, Dec 23, 2017 Vanguard Newspapers.
  • Nigerian International Franchising Association Newsletter December 2013, Dr. Uche Eweluka Ofodile, Franchising Law in Nigeria.
  • National Office For Technology Acquisition and Promotion Act CAP. N62 L.F.N. 2004.

About the Author

Paul Elebute is an award-winning scholar, attorney, internationally published researcher, SDGs enthusiast, and business consultant.. You can read more about him here and read his other works here.

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