WHAT TO KNOW ABOUT FRANCHISING.
In Nigeria, we’ve got the Kentucky Fried Chicken (KFC), Dominos Pizza, Chicken Republic, and a few other established franchise businesses dominating their markets.
The term FRANCHISE as defined in Black’s Law Dictionary is a special privilege to do certain things conferred by Government on an individual and corporation, and which does not belong to citizens generally of common right.
In commercial practice, it is a privilege granted or sold; such as to use a name or to sell products or services. It is economic right given by the manufacturer or supplier of a product to a retailer to use its products on terms and conditions mutually agreed upon.
Simply put, a franchise is a license from the owner of a trademark or trade name permitting another to sell a product or service under his name or mark.
The basic elements of franchising are:
- PARTIES: A party (the FRANCHISOR) develops a system of doing business and grants another PARTY (the FRANCHISEE) the right to use this System. Example ABB granting an Electrical Engineering company the right to sell its products to a third parties.
- Both parties are legally and financially independent entities. The Franchisee invest its own money and bears the risk of losing the money so invested if the project/business venture were unsuccessful
- The granting of the right to use the franchise system involves the right and privilege of the Franchisee to use the Franchisor’s intellectual and industrial property, knowledge, business and technical methods, and other intellectual property rights.
- The Franchisee in consideration undertakes to allow the methods elaborated by the Franchisor and to pay a certain fee.
- The Franchisor retains rights of control over the performance of the Franchisee’s business and use of the Franchisor’s economic properties.
- The Franchisor may also undertake providing the Franchisee with training and continuing assistance, as may seem appropriate (This is optional and if necessary, must be expressly stated in the FRANCHISE AGREEMENT)
Unlike the UNITED STATES OF AMERICA, CANADA, FRANCE where Franchising is regulated by specific legislations or code of conduct, Nigeria has no separate legislations to regulate franchising.
The Nigerian laws regulating franchising are laws encompassing areas such as the law of contract, agency, distribution, leasing, assignment, intellectual and industrial property laws and other legislations which may become applicable in particular cases.
In sum, the franchisor owns the overarching company, trademarks, and products, but gives the right to the franchisee to run the franchise location, in return for an agreed-upon fee. Fast-food companies are often franchised. You’ll also find franchises in many different fields. There’s Hilton Hotels, for example, or the supermarket chains, or courier companies, gyms, office-supply firms, tax accountants, auto-repair firms, and much more.
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