Franchise Agreement

The Franchise Agreement is an agreement between the owner of a business (known as a franchisor) and another (known as the franchisee), stating the terms and conditions of a franchise.
A franchisor is the owner of an existing business and engages in the operation and management of the business. The franchisor has an already-developed business brand, business methods, and principles that it uses to run its business. A franchisee is the party that intends to operate a business adopting the franchisor's brand or business name and methods.

A franchise involves a process where a franchisor grants a license to a franchisee to operate its business or distribute franchisor's goods or services within a particular location and period using the franchisor's brand name and operating methods or system. The franchisor is generally involved in the selection of a new location of the franchise and training of staff to ensure that the franchisee adheres to the franchisor's rule of operation. By using this agreement, the franchisee replicates the franchisor's business and does not start an entirely new business.

For example, Mr. A owns Chicken Republic restaurant, an already existing business that operates only in Lagos. If Mr. B wants to operate a restaurant in Enugu, using the name 'Chicken Republic' Mr. B will approach the owner of Chicken Republic (Mr. A) to discuss the terms and conditions of the new franchise business which will operate in Enugu.

From this illustration, Mr. B does not intend to start a new business but prefers to replicate the Mr. A's (the franchisor) business in a different location using the Mr. A's brand name (Chicken Republic) and business methods.

Many people will prefer to operate a franchise business because of the franchisor's already established brand and it is generally cheaper than starting a new business.

How to use this document

After completing this document, at least two copies of this document should be printed and signed by the parties to the agreement. Each party should keep a signed copy for record purposes.

Applicable law

There is no specific law regulating franchise business in Nigeria. However, franchise transactions are regarded as transfer of technology, and as such the National Office for Technology Acquisition and Promotion (NOTAP) Act, 2004 regulates the transfer of foreign technology in Nigeria. This means that if the franchiser is a foreigner, the agreement for the transfer of technology must be registered with the NOTAP.

Also, the Companies and Allied Matters Act regulates all registered businesses and companies in Nigeria. Also, the general rules of contract apply to this document.

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