The Legal Framework for Franchising in Nigeria
A franchise is a business arrangement in which the franchisor — usually an established business or brand owner — grants the franchisee the right to operate a business using the franchisor’s brand name, trademark, business model and support systems within a defined territory.
Franchised brands operating in Nigeria include Domino’s, KFC, Cold Stone Creamery, Pizza Hut, SPAR and Burger King, among others.
This article will help you:
- Understand the legal framework for franchising in Nigeria
- Understand what you need to do to set one up
- Understand the pitfalls
Key terms
- Franchisor — the party permitting the use of its brand and business system in exchange for a benefit.
- Franchisee — the party using the brand and system, and paying for the right to do so.
Nigeria has no franchise-specific legislation. Franchises operate here and thrive here, governed principally by the contract between the parties — the franchise agreement — sitting on top of the general commercial law.
That may change. The Franchising (Establishment) Bill 2023 was passed by the Senate and is awaiting presidential assent. It would create a dedicated regulatory framework for franchising in Nigeria for the first time. Anyone structuring a franchise now should build in the flexibility to comply with a regime that may arrive during the life of the agreement.
Until then, the laws that actually govern your franchise are:
- The NOTAP Act — regulating the transfer of foreign technology into Nigeria. For most franchisees this is the most important statute on the list, and we deal with it separately below.
- The FCCPA 2018 — protecting consumer rights and prohibiting anti-competitive practices. Franchise agreements often contain exclusive territories, supply tie-ins and pricing provisions, all of which need to be tested against the competition rules. Note too that the FCCPC clears mergers and acquisitions, which is why it appeared in the Shoprite transaction discussed below.
- The IP laws — the Trade Marks Act 1967, the Patents and Designs Act 1971 and the Copyright Act 2022. The intellectual property is the thing being franchised, so its protection is not a side issue.
- CAMA 2020 — governing the corporate vehicle through which the franchisee operates.
- The NIPC Act and the exchange control regime — relevant where foreign capital is coming in, and to your ability to get money out later.
- The Nigeria Tax Act 2025, in force from 1 January 2026 — see the tax section below.
NOTAP registration: the step that determines whether you can pay your franchisor
If you take one thing from this article, take this one.
A franchise arrangement is treated in Nigerian law as a transfer of technology. NOTAP itself describes a franchise agreement as a technology transfer agreement in which the tested business model operations of a company are licensed, usually accompanied by proprietary rights including know-how, training and operating manuals. Every agreement for the transfer of technology between a foreign transferor and a Nigerian transferee must be registered with the National Office for Technology Acquisition and Promotion.
What happens if you don’t register? Section 8 of the NOTAP Act prevents payment to the foreign party being made through, or on the authority of, the Central Bank of Nigeria or any licensed bank in Nigeria. The NOTAP certificate of registration is what the CBN requires before it will authorise the transfer of any payment due to the franchisor. So an unregistered franchise agreement is not void — it is simply unpayable through official channels, which for a franchisor is functionally the same problem.
NOTAP does not rubber-stamp. It applies its Revised Guidelines for the Registration and Monitoring of Technology Transfer Agreements, last revised in 2020, and it requires specific terms and conditions to be present before it will register anything. Its recent emphasis has been on local content — the localisation of skills, materials and production.
NOTAP’s published requirements state that the applicant company must be involved in manufacturing in Nigeria, that the agreement must relate to products produced in Nigeria, that companies engaged in the sale of imported finished products are not eligible to apply, and that the transferee must demonstrate the physical presence of a factory in Nigeria. If your franchise model is importing and reselling finished goods, take advice on how this applies to you before you sign a royalty obligation you may not be able to remit.
No one has to tell you the truth before you sign
This surprises people who have researched franchising in other markets. Because Nigeria has no franchise-specific law, there are no mandatory pre-sale disclosure obligations. No Franchise Disclosure Document is required by law. No cooling-off period. No prescribed financial performance representations.
The common law of contract still protects you against misrepresentation, but that is a remedy after the fact, not a safeguard before it. In practical terms, the due diligence nobody is legally obliged to hand you is due diligence you have to do yourself: the franchisor’s litigation history, the performance of its existing Nigerian franchisees, its financial position, and whether the agreement is capable of NOTAP registration at all.
Note also that being the franchisor’s only appointee in Nigeria does not put you outside the framework. A sole franchisee or licensee is still treated as a franchisee.
Franchise structures in Nigeria
In November 2016, the Federal Ministry of Industry, Trade and Investment, in partnership with UKaid, conducted a study on tackling access to finance and increasing the potential of franchising in Nigeria. Its findings are now a decade old but remain instructive — among them, that despite the number of franchisor brands across different sectors, only 30% of those companies understood the actual franchise business model.
Three broad structures operate in Nigeria:
The agency model, where a company operates outlets through local operators who pay an upfront fee covering software, installation and training. Betting and financial services agency networks are the common examples — though note that gaming regulation in Nigeria has been substantially contested and restructured in recent years, and the tax treatment of gaming companies changed under the Nigeria Tax Act 2025, so take current advice if that is your sector.
The licence model, where a Nigerian business obtains a licence from an international brand and opens outlets selling its products.
The distributorship model, where a company builds a distributor and sub-dealer chain to move products through thousands of dealers nationwide. Vitafoam is the standard Nigerian illustration.
Nigeria’s federal tax framework was rewritten by the Nigeria Tax Act 2025 and three companion Acts, effective 1 January 2026. The Federal Inland Revenue Service is now the Nigeria Revenue Service.
The change that matters most for franchising is the treatment of royalties. Under the new Act, royalties encompass any payments for the right to use intellectual property, so non-resident franchisors licensing trademarks, software or know-how to Nigerian franchisees should expect withholding tax on those payments unless relief is available under a tax treaty. Build this into your royalty modelling — the difference between a gross and a net-of-withholding royalty is a live commercial negotiation, and it is better had before signature.
The pitfalls
Foreign exchange is the dominant risk. Franchising and licensing in Nigeria face significant threats stemming from economic instability — FX risk, persistent inflation and naira devaluation — compounded by poor infrastructure and unstable regulation and policy. A royalty denominated in dollars against naira revenue is a structural exposure that no amount of good drafting fully solves.
Look at what happened to the article’s own former lead example. In 2021, Shoprite Holdings of South Africa exited direct ownership of its Nigerian business, selling to Ketron Investment Limited, a consortium led by Persianas Investment Limited, with the express intention of converting from an ownership model to a franchise model. The FCCPC approved the acquisition of 25 outlets across eight states, and the South African parent was to provide administrative and technical support.
It did not work. The phased shutdown began in Kano in 2024 and concluded with the closure of the Lagos stores; Shoprite had packed out of its last sites by January 2026. Shoprite now sits alongside Unilever, GlaxoSmithKline and Procter & Gamble on the list of brands that have exited Nigeria.
The lesson is not that franchising doesn’t work in Nigeria — Domino’s, KFC and others have run here successfully for years. It is that a franchise structure does not insulate you from the underlying economics. If the unit economics only work at a particular exchange rate, the franchise agreement will not save you.
Other pitfalls to plan for: unregistrable agreements that leave you unable to remit royalties; territory and exclusivity provisions that fall foul of the FCCPA; supply chain terms requiring imported inputs paid in foreign currency; and the absence of any statutory disclosure, which puts the whole burden of investigation on you.
Need Legal Support?
Thank you for reading this post, we hope you have found it useful. If you have, please share with your network using one of the share buttons below.
We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.