Franchise Agreement (Nigeria)

A Franchise Agreement in Nigeria records the obligations the parties accept and the terms governing their arrangement.

The Trademarks Act Cap T13 LFN 2004 governs the registration and licensing of the franchisor's brand and logo at the Trademarks, Patents and Designs Registry (TPDR) under the Federal Ministry of Industry, Trade and Investment. The Transfer of Technology (Registration etc.) Act Cap T14 LFN 2004 requires registration of franchise and technical services agreements involving foreign technology transfer with the National Office for Technology Acquisition and Promotion (NOTAP) — a mandatory step before the CBN Authorised Dealer can process royalty remittances to a foreign franchisor under the CBN Foreign Exchange Manual 2018.

The Federal Inland Revenue Service (FIRS) imposes 10% withholding tax on royalties paid to non-resident franchisors under Section 81 of the Companies Income Tax Act (CITA Cap C21 LFN 2004), and 7.5% VAT under the Value Added Tax Act Cap V1 LFN 2004 as amended by the Finance Acts 2019, 2020, and 2021. Transfer pricing compliance under the Income Tax (Transfer Pricing) Regulations 2018 applies where franchisor and franchisee are related parties under Section 15 of the regulations.

The Nigerian franchise market has grown significantly, with domestic brands — Chicken Republic (UAC Restaurants Limited), Mr Biggs, HealthPlus, MedPlus, and Chicken Express — operating multi-unit franchise networks, and international brands including Domino's Pizza (Food Concepts Plc), Cold Stone Creamery, and KFC operating through master franchisees registered with the Corporate Affairs Commission. The Nigerian Franchise Association (NFA) promotes industry standards and coordinates with the Federal Competition and Consumer Protection Commission (FCCPC) on consumer protection matters under Section 17 of the Federal Competition and Consumer Protection Act 2018 (FCCPA 2018). The Securities and Exchange Commission (SEC Nigeria) regulates franchise-linked investment schemes under the Investment and Securities Act 2007 Cap I24 LFN 2004.

The Franchise Agreement must establish the precise scope of the licence (exclusive, sole, or non-exclusive), the licensed territory across Nigeria's 36 states and Federal Capital Territory, the term and renewal conditions, mutual obligations on training and quality standards under Section 5 of the Trademarks Act Cap T13, NOTAP registration commitments under Section 4 of the Transfer of Technology Act Cap T14, tax compliance provisions, and post-termination restrictions including non-compete obligations enforceable under Nigerian law as confirmed by the Supreme Court of Nigeria in Ekpenyong v Nyong [1975] 2 SC 71. The National Agency for Food and Drug Administration and Control (NAFDAC) administers product approvals for food and pharmaceutical franchise operators under the NAFDAC Act Cap N1 LFN 2004, and the Standards Organisation of Nigeria (SON) issues product certifications under the Standards Organisation of Nigeria Act No. 14 of 2015.

A Franchise Agreement (Nigeria) becomes necessary whenever a business owner plans to expand by licensing their brand and system to independent operators in Nigeria, or when an investor seeks to enter a franchise business by acquiring a licence from an established franchisor.

International franchisors entering Nigeria — including QSR brands, education franchises, healthcare service franchises, and hospitality brands — must execute locally governed Franchise Agreements compliant with Nigerian law, include required NOTAP registration provisions under Section 4 of the Transfer of Technology Act Cap T14 LFN 2004, and address CBN Foreign Exchange Manual 2018 requirements for royalty remittances through CBN-licensed Authorised Dealer banks such as Zenith Bank, Access Bank, and GTBank. The Federal Inland Revenue Service (FIRS) requires deduction of 10% withholding tax on royalties under Section 81 of the Companies Income Tax Act (CITA Cap C21 LFN 2004) before any payment is remitted to a non-resident franchisor.

Domestic Nigerian franchisors expanding beyond their home city — for example, a Lagos-based Quick Service Restaurant chain opening franchise units in Abuja, Port Harcourt, Kano, or Ibadan — require Franchise Agreements that address territorial exclusivity, the Corporate Affairs Commission (CAC) registration requirements for each franchisee company under Section 18 of CAMA 2020, and National Agency for Food and Drug Administration and Control (NAFDAC) product licensing under Section 5 of the NAFDAC Act Cap N1 LFN 2004 for food and beverage franchise products.

An investor purchasing a master franchise for Nigeria from an international brand requires a Master Franchise Agreement at the national level (with associated NOTAP registration under the Transfer of Technology Act Cap T14), and each Nigerian sub-franchisee subsequently requires a separate Unit Franchise Agreement. The master franchisee must hold all required sector licences — NAFDAC product registration, Standards Organisation of Nigeria (SON) certification under the SON Act No. 14 of 2015, or Central Bank of Nigeria (CBN) licence for financial service franchises under the Banks and Other Financial Institutions Act 2020 (BOFIA 2020).

Renewal of an existing franchise at the end of its term requires either a new Franchise Agreement or a formal renewal agreement, with updated NOTAP registration if the royalty rate or fee structure changes. Conversion of a company-owned outlet to a franchised location, and appointment of a franchise developer under an Area Development Agreement, all require properly executed agreements compliant with CAMA 2020 and the Trademarks Act Cap T13 LFN 2004. Disputes are resolved by the Lagos Court of Arbitration (LCA) under the Arbitration and Mediation Act 2023 or before the Federal High Court under Section 251 of the Constitution of the Federal Republic of Nigeria 1999.

An effective Nigerian Franchise Agreement must contain the following essential elements to be enforceable and compliant with Nigerian law.

Party Identification and Corporate Status: Full CAMA 2020 registered names, CAC RC numbers, registered office addresses, and Tax Identification Numbers (TIN) issued by the Federal Inland Revenue Service (FIRS) for both the franchisor and franchisee. Confirm that the franchisee company's Memorandum of Association filed at the Corporate Affairs Commission (CAC) under Section 27 of CAMA 2020 authorises the operation of the franchised business type.

Licence Grant and Scope: A precise statement of whether the franchise licence is exclusive (no other franchisee in the territory), sole (franchisor may not appoint other franchisees but may operate directly), or non-exclusive. The geographic territory must be specifically defined — by state, local government area (LGA), or other boundary.

Trademark Licence: A limited, non-exclusive licence to use the franchisor's registered trademarks (citing the Trademarks Act Cap T13 LFN 2004 and the Trademarks, Patents and Designs Registry registration numbers) strictly within the franchised business and territory, with prohibitions on sub-licensing, modification, or independent registration. Section 5 of the Trademarks Act Cap T13 confers exclusive rights on the registered owner.

Fees and Royalties: The initial franchise fee (one-time payment on signing), ongoing royalties (typically 4–8% of gross revenue in Nigerian franchise practice), marketing fund contributions, and technology fees, all stated in Nigerian Naira (NGN) or USD with the exchange rate mechanism referencing the CBN Investors' and Exporters' (I&E) Window rate on FMDQ OTC Securities Exchange. Provisions for FIRS withholding tax deduction at 10% under Section 81 of the Companies Income Tax Act (CITA Cap C21 LFN 2004) and VAT at 7.5% under the Value Added Tax Act Cap V1 LFN 2004.

NOTAP Registration: The parties' joint obligation to apply for and obtain NOTAP registration under Section 4 of the Transfer of Technology Act Cap T14 LFN 2004 before executing royalty remittances through a CBN Authorised Dealer under the CBN Foreign Exchange Manual 2018. The National Office for Technology Acquisition and Promotion (NOTAP) certificate number must be inserted once obtained. Without the NOTAP certificate, the Authorised Dealer bank cannot process Form A remittances under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act Cap F34 LFN 2004.

Training and Operational Support: The franchisor's obligation to provide pre-opening training, ongoing refresher training, access to the Operations Manual (subject to the franchisee's confidentiality obligations), and technology updates. The franchisee's obligation to attend all mandatory training programmes and to confirm their staff are trained to franchisor standards under the Factories Act Cap F1 LFN 2004 workplace requirements.

Quality Standards and Inspections: The franchisor's right to conduct unannounced quality inspections, the standards the franchisee must maintain under the National Agency for Food and Drug Administration and Control (NAFDAC) Act Cap N1 LFN 2004 and Standards Organisation of Nigeria (SON) Act No. 14 of 2015, and the consequences of repeated quality failures including remediation plans and ultimately termination under Section 8 of the Franchise Agreement.

Term, Renewal, and Termination: The initial term (typically 5 years), renewal conditions (including performance benchmarks and payment of a renewal fee), grounds for immediate termination (insolvency under CAMA 2020, criminal conviction under the Criminal Code Act Cap C38 LFN 2004, abandonment, material brand breach), and post-termination obligations including de-branding, return of materials, and non-compete restrictions for 12–24 months. Forms-legal.com provides this Franchise Agreement (Nigeria) template as a starting point — review with a qualified Nigerian lawyer enrolled at the Nigerian Bar Association (NBA) before executing.

Dispute Resolution: Mediation followed by arbitration under the Arbitration and Mediation Act 2023, administered by the Lagos Court of Arbitration (LCA) or the Lagos Multi-Door Courthouse (LMDC), with Nigerian law as governing law. The Federal High Court retains jurisdiction over trademark infringement claims under Section 5 of the Trademarks Act Cap T13 LFN 2004 and NOTAP-related disputes under the Transfer of Technology Act Cap T14 LFN 2004.