The Role Of The Nigerian Franchise Association

Introduction

In the franchise business, the franchisor is the key holder of standards; the responsibility primarily falls on him to ensure that best practices are maintained. Some franchisors ignorantly operate the business mainly for the monetary gains.

franchisors invest in building the brand, by ensuring that the standards are sustained and that the franchisees succeed in all locations, thereby improving the chances of brand growth and deliver lasting rewards to the investors.

What is franchise

The Nigerian International Franchise Association defines a franchise as “a business arrangement” where “the franchisor grants the franchise operator (the franchisee) the right to distribute certain products or services in a particular way, at a particular location, and for specified periods of time. In return, the franchisee pays the franchisor fees and royalties.

   The type of franchising that is most common today is called “business format franchising” or “package franchising”. With this type of franchising, the franchisee receives more than just the rights to use the product, service, and trademark. They receive the whole business plan including the standardized marketing strategy, operating and training manuals, quality control, support from the franchising company, store layout, etc1 Franchise Agreement is a business arrangement whereby the franchisor grants the rights to exploit the system developed by the franchisor including the intellectual property rights (IPR) to another party, the franchisee, to conduct the business or provide and sell the associated goods or services franchise therefore contemplates the use of a broad range of intellectual property rights such as formulas and knowhow (patents and trade secrets),design and get up of the business and its products, trademarks, adverts, written and artistic expressions (copyright) among others. Franchises are advantageous because it usually entails technology transfer particularly from expatriate businesses into Nigeria. This provides employment opportunities and helps to boost the business of the local franchisee who relies on the existing goodwill, expertise

and customer base of the franchisor. The franchisee spends less on advertisement and other similar expenses. Nigeria has two main bodies overseeing franchise operations in Nigeria, the National Office for Technology Acquisition and Promotion (NOTAP) and Nigerian International

Franchise Association, while the former is a Government agency, the latter is a private body. While there is currently no specific law regulating franchises in Nigeria, the National Office for Technology Acquisition and Promotion

Act, Chapter N62, Laws of the Federation of Nigeria 2004 (NOTAP Act) regulates the transfer of foreign technology to Nigeria. Other laws applicable to a franchise relationship includes the Patent and Designs Act, Trade Marks Act, and the Copyrights Act etc.

A franchise arrangement involves the transfer of technology and thus is regulated by the provision of the NOTAP Act. All agreements for the transfer of technology between a foreign transferor and a Nigerian transferee should be registered with NOTAP. Such agreements to be registered are with regards to

Franchise Development Academy and Institute

As widely recommended, Franchise Institutes and Academies, typically have an interplay of roles with franchise consulting companies, especially in the areas of capacity building service offering to franchise stakeholders. These types of organizations are usually able to offer large-scale services, much needed in Nigeria, where a massive training and awareness campaign is necessary. Again, while Franchise Academies basically provide training programs, Franchise Institutes act as a professional membership certifying institution, having the power to exert some level of control and discipline on certificate holding members, whose certificates could be recalled if they act against set industry standards. Typically, these types of institutions are set up and operated by professionals within the private sector, however with usual support and collaboration with local and international franchise associations. The costs of the services are borne by industry actors who require the certification to meet regulatory requirements of local franchise laws and the franchise association. Examples are The Australia Franchise Academy; The Singapore Training School; The School of Franchising – USA; and The Institute of Certified Franchise Executives – UK.

          Steps To Franchising In Nigeria – Fast Food Business As A Case Study

1) Research

This is necessary in order to understand the operation of the market in the intended industry. Research should cover the laws governing the industry at which point the services of a Law Firm vast in the industry is needed, research should also cover licenses, permits, IP rights to be purchased, support to be received from the intending franchisor, cost of setting up the business, etc.

2) Application

After research, an application to the prospective fast-food franchisor is made. The franchisor would in turn provide the entrepreneur with information concerning its franchise after parties have executed a Non-discourse Agreement. The fast-food franchisor provides the entrepreneur with a Franchise Disclosure Document after due diligence. This document delineates the roles of the franchisor and franchisee, the royalty fee, the manner of payment of the royalty fee, manner of business training and equipment to be covered by the royalty fee, nature of intellectual property transfer etc. After the application is approved, parties can enter into a franchise agreement.

3) Funding

Often, a franchisor may assist the franchisee with funding. This funding may be repaid in form of royalties or a certain percentage of profit is paid to the franchisor until the loan is paid off. Funding covers costs which include buying inventory, obtaining permits rents, insurance, equipment, and machinery, etc. Nevertheless, fast food franchisors who do not provide funding often guide on how to obtain funding from other sources.

Top Franchises in Nigeria

Quick service restaurants (QSRs) and fast-food operations are the top franchises in Nigeria. South Africa and U.S. companies are the highest owners of franchise operations in Nigeria. These includes Dominos, KFC, SPAR, Shoprite, Pizza Hut, etc. In April 2021, U.S. restaurant brand Burger King formally announced its entry into Nigeria The brand opened its doors to customers in Nigeria in November, 2021.

Key roles of franchisors

1. Offer comprehensive and regular franchisee training on processes, systems and strategies to all the staff of the brand, within both franchisor/franchisee outlets.
2. Offer incentives, bonuses and rewards to keep the franchisee motivated within the relationship. Such incentives could include access to finance, a guaranteed margin, a free set up, etc.
3. Provide necessary guidance, mentorship and handholding to the franchisee especially during the first 6-12 months.
4. Provide regular inspection visits and mystery shopping to all outlets, to maintain standards.
5. Promote Franchisee’s business through participation at relevant industry events such as franchise shows, exhibitions, seminars and workshops.
6. Assists to recommend and register franchisee with support organizations such as Nigeria International Franchise Association (NIFA), World Franchise Associates (WFA), and International Franchise Association (IFA).

Typical roles of Nigerian franchise association

The Nigerian Franchise Association (NFA) is a key organization that plays a pivotal role in the development and regulation of the franchise industry in Nigeria. Established to promote the growth of franchising as a viable business model, the NFA works to create a conducive environment for both franchisors and franchisees, ensuring that the industry operates under best practices and international standards.

One of the primary roles of the NFA is to advocate for policies and regulations that support the growth of franchising in Nigeria. The association works closely with government bodies, such as the Nigerian Investment Promotion Commission (NIPC) and the Corporate Affairs Commission (CAC), to ensure that the legal and regulatory frameworks governing franchising are favorable and in line with global best practices. This advocacy helps in creating a stable and predictable business environment, which is crucial for attracting both local and international franchises.

The NFA also provides a platform for networking and knowledge sharing among its members. Through various seminars, workshops, and conferences, the association brings together franchisors, franchisees, legal experts, and financial institutions to discuss trends, challenges, and opportunities in the franchise industry. These events are instrumental in building the capacity of franchise operators and ensuring that they are well-equipped to navigate the complexities of the market.

In addition, the NFA plays a significant role in educating the public about franchising as a business model. Through awareness campaigns and outreach programs, the association helps potential entrepreneurs understand the benefits and risks associated with franchising. This education is crucial in helping individuals make informed decisions about entering the franchise business.

Overall, the Nigerian Franchise Association is a cornerstone of the franchise industry in Nigeria, driving growth, ensuring adherence to best practices, and fostering a collaborative environment for all stakeholders involved in the franchising ecosystem.

The NFA Embarks on frequent and largescale seminars and awareness campaigns to galvanize support for the fledgling franchise industry.

The NFA Operates high standard training programs towards educating and certifying all industry players including franchise product managers of financial institutions, franchisors, franchisees, law firms offering franchise services, franchise consulting companies, government officials playing regulatory roles for franchises etc. The NFA Provides specialized training in the field of franchising for franchisors and franchisees. The NFA is involved in the Development of a database of franchisors and maintaining industry insights and updates to all members. The NFA Embarks on extensive education and sensitization of everyone involved or interested in the franchise business e.g. agents, distributors etc. this can be done in collaboration with financial institutions.

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