By Paul Elebute | Osun, Nigeria. Economic development is an indispensable reality with every modern state. And in pursuit of this all-im...

Summary Legal Inventory of Franchising in Nigeria I

By Paul Elebute | Osun, Nigeria.

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, as a matter of fact exist in some bustling parts of the country. In Nigeria however, relevant formulations in law and regulatory policies have not been cardinally 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 wannabe 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 actually 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 however 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 are no specific legislations 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.

To be continued