Franchise law is a relatively niche area of law in Nigeria. It is not as common as other areas of law in Nigeria. Franchising is a commercial aspect of law. Many law students would be familiar with the word ‘franchise’ from commercial law and contract law. Nigeria does not have a specific Franchise legislation like such countries as Brazil [Brazilian Franchise Law (Law No. 8955 of December 15, 1994)], Australia [Trade Practices (Industry Codes-Franchising)] or China [Measures for the Administration of Commercial Franchise)(2005)].[1] In this article, we shall discuss franchise law and franchise related laws in Nigeria.
What is a franchise? According to the International Franchise Association, a franchise is “the agreement or license between two legally independent parties which gives a person or a group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor)”.[2] In layman terms, a franchise is a contract between two parties where one party (franchisee) agrees to market a product of another party (franchisor) in return for financial remuneration.
Franchise law on the other hand, is the law regulating the offer or sale of Franchises, business opportunities, seller-assisted marketing plans or similar relationships, or governing the relationships between franchisors and franchisees, manufactures and dealers, or grantors and distributors, including those laws that address unfair practices related to, or the non-renewal or transfer of, franchises, dealerships and distributorships.[3]What this means is that franchise law is a law that governs the relationships between a party who agrees to market/distribute a product (franchisee) on the behalf of the other (franchisor).
As was previously stated, Nigeria does not have a specific law in regards to franchising. However, just because there is no franchise specific law does not mean that franchising as a whole is not regulated in Nigeria. There are numerous laws in Nigeria that influence franchising in the country. Franchising is comprised of the following list of laws: Company Law, Intellectual Property Law, Tax Law, Labor Law, and Employment Law.[4]In scenarios where the franchisor is a foreign entity, other areas of law apply such as Immigration Law, Foreign Investment Law, Foreign Exchange Law and Money Laundering Law.
We shall now analyze the following statutes that have impacted franchising in Nigeria:
- The Trademark Act 1965 (Cap 436, Laws of the Federation of Nigeria 199). This deals with Trademarks, which is an aspect of Intellectual Property Law. As previously stated, intellectual property law is an element of franchising.
- The Patents & Design Act 1970 (Cap 344, Laws of the Federation of Nigeria 1990); This Act makes provisions for the proprietorship of Patents and Designs in Nigeria.[5] The 1970 Act is not franchise specific but has elements of franchising as a result of patents and designs.
- The Copyright Act 1988 (Cap 68, Laws of the Federation of Nigeria 1990); This piece of legislation is concerned with the ownership of copyrights in Nigeria. It is not a franchise-specific legislation but copyright is under intellectual property law which is an element of franchising. Section 3 of the Act talks about copyright by reference to country of origin. What this means is that any copyright that is published or made in Nigeria shall make reference to the country of origin of the copyright itself. Section 4A grants a company established under the laws of a country that is a party to an obligation to a treaty or other international agreement to which Nigeria is a party the right to own its copyright in Nigeria.[6]
- National Office of Technology Acquisition and Promotion (NOTAP) Act No. 70 of 1979 (Cap 268 Laws of the Federation of Nigeria 1990). This Act regulates the transfer of foreign technology to Nigeria. A franchise arrangement is regarded as involving the transfer of technology and as such is regulated by the provisions of the NOTAP Act. It should be noted that NOTAP is not the regulatory act for franchising in Nigeria. Section 4(d) and (e) of the NOTAP Act grants NOTAP the power to register franchise agreements involving franchisors. The section goes further to state that the agreement shall be registered if in the opinion of NOTAP, it involves the use of trademarks, 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 provision of operating staff or managerial assistance and the training of personnel etc.
- The Nigerian Investment Promotion Commission Act (Decree No. 16 of 1995). The NIPC Act is responsible for registering foreign investments in Nigeria, as well as liaising between investors and government.
- The Immigration Act 2015 (Cap. 171 Laws of the Federation of Nigeria 1990). This statute regulates the movements of persons entering or leaving Nigeria. This statute provides that any company with non-nationals must obtain a business permit in order to carry on business in Nigeria. Section 36(1) (b) of the Act states that any immigrant who wishes to conduct any business in Nigeria must obtain the consent of the Nigerian Minister of Interior in writing.[7]
- The Immigration Regulations 2017; Like the Immigration Act 2015, this act stipulates that any company with non-nationals must obtain a business permit in order to conduct any business in Nigeria. Section 4(1) of the Act asserts that for a foreign company to establish a business in Nigeria, it must first of all obtain a business permit from the Minister of Interior otherwise known as the “Minister”.[8] This is not franchise specific but it could be said that for a franchisor to set up a franchise in Nigeria it would need to obtain a business permit from the Minister of Interior.
- The Companies and Allied Matters Act 2020. This act deals with the registration and exemptions of foreign companies in Nigeria. Any foreign entity that intends to set up a business in Nigeria must incorporate a local company for that purpose. Section 78 of the Act asserts that any foreign company that intends to carry out business in Nigeria shall take all necessary steps to incorporate the company as a separate entity in Nigeria and until such act is achieved, cannot conduct business in Nigeria.[9]
Agencies that Regulate Franchising in Nigeria
In many jurisdictions, thee are special agencies that regulate franchising and implement franchise-specific laws and regulations. However, in Nigeria, there is no specific-designated franchise agency. What you have are agencies that regulate elements of franchising such as:
- The Registrar of Trademarks, Patents and Industrial Design, Federal Ministry of Commerce;
- The Nigerian Copyright Commission which is under the Ministry of Culture;
- The National Office for Technology Acquisition and Promotion;
- Nigerian Investment Promotion Commission and
- The Corporate Affairs Commission.
Conclusion
Nigeria does not have a franchise-specific legislation. However, as previously mention, many laws in Nigeria affect franchising agreements directly and indirectly. Does Nigeria need a franchise-specific legislation? Sure it does. As Nigeria seeks to attract foreign investment into its jurisdiction, there will be a need to regulate the activities of foreign companies in the country in order to protect local businesses (franchisees).
BIBLIOGRAPHY
LIST OF STATUTES
- Copyright Act (Cap. 68, Laws of the Federation of Nigeria, 1990 as amended by the Copyright Amendment Decree No. 98 of 1992 and the Copyright (Amendment) Decree 1999).
- Companies and Allied Matters Act, 2020.
- Immigration Act, 2015.
- Immigration Regulation, 2017.
- Nigerian Investment Promotions and Commissions Act,
LIST OF WEBSITES
- https://archive.businessday.ng/professional-services/article/franchising-law-in-nigeria/#:~:text=Nigeria%20does%20not%20have%20a%20franchise-specific%20legislation.%20In,Disclosure%20Act%20of%202006%29%20that%20have%20franchise-specific%20laws.
- http://www.commonlii.org/ng/legis/num_act/pada195/
- https://www.lawinsider.com/dictionary/franchise-law
- http://www.nigerianfranchise.org/images/NiFA_Newsletter_03_05_14.pdf
Babatunde Denton is an associate of The City Law Associates. He was called to the Nigerian Bar in 2016 and specializes in immigration law, commercial law and intellectual property law. His contact address is Suite 3, 18 King George V Street, Onikan, Lagos. Email address is denton@citylaw.ng.
[1] http://www.nigerianfranchise.org/images/NiFA_Newsletter_03_05_14.pdf
[2] https://archive.businessday.ng/professional-services/article/franchising-law-in-nigeria/#:~:text=Nigeria%20does%20not%20have%20a%20franchise-specific%20legislation.%20In,Disclosure%20Act%20of%202006%29%20that%20have%20franchise-specific%20laws.
[3] https://www.lawinsider.com/dictionary/franchise-law
[4] https://archive.businessday.ng/professional-services/article/franchising-law-in-nigeria/#:~:text=Nigeria%20does%20not%20have%20a%20franchise-specific%20legislation.%20In,Disclosure%20Act%20of%202006%29%20that%20have%20franchise-specific%20laws.
[5] http://www.commonlii.org/ng/legis/num_act/pada195/
[6] Copyright Act (Cap. 68, Laws of the Federation of Nigeria, 1990 as amended by the Copyright Amendment Decree No. 98 of 1992 and the Copyright (Amendment) Decree 1999).
[7] Section 36 (1)(b) of The Immigration Act 2015, Laws of the Federation of Nigeria.
[8] Section 4 (1) of The Immigration Regulations, 2017
[9] Section 78 (1) of the Companies And Allied Matters Act, 2020.