CHALLENGES OF FRANCHISING
IN NIGERIA
HOW TO SUPPORT AND CONDUCT
FRANCHISING FOR EFFECTIVE ECONOMIC
DEVELOPMENT
JOINT AFRICAN INSTITUTE
NOVEMBER 20-23 2005
CAIRO, EGYPT
VALERIE OGBUAH
MATRIX-SOLICITORS
UBA HOUSE, 6TH FLOOR
MARINA, LAGOS
01-2647971; 2601287-9
INTRODUCTION
1.
Perspectives of Franchising in Nigeria:

To highlight the constraints of the existing operators
and the potential entrants into the Nigerian market

Examine the environmental considerations and;

As a way forward to improving Nigerian products
and services through transfer of technology
Valerie Ogbuah
Matrix-Solicitors
2.
Nigeria has a large market with a population of 130 million,
the most populous country in Africa
3.
As the largest West African market, Nigeria could be the
gateway for Franchising in West Africa and a platform for
franchise development in Africa, 2nd only to South Africa
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Matrix-Solicitors
STATUS OF FRANCHISING IN
NIGERIA
1.
Franchising as a business concept in Nigeria is:
Relatively underdeveloped
Awareness is relatively low, but is picking momentum
Establishment of a franchise association (NIFA)
2. Product franchising has been prevalent examples include:
Soft drinks market (Coca Cola etc )
Petroleum ( Total , Elf, Mobil, etc)
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Matrix-Solicitors
3.
The Business format franchise system is emerging and is
increasingly gaining momentum especially in the QSR industry.
Examples include:
Duraclean
Fast food – (Chicken Licken, Butterfields brands, Steers,
Debonairs, Churches Chicken, Mochachos Chicken village,
Barceló's, St Elmo's etc.)
Retail – (Woolworths, Nike, Addidas, Game, Shoprite)
Valerie Ogbuah
Matrix-Solicitors
HISTORY OF FRANCHISING
In 1960, Product Franchising was introduced to Nigeria in
sectors like soft drinks, petrol, automobiles etc
In 1980, First Business Format Franchise bought Chief Moses
Emeya from Duraclean International, USA
In 2001, Food Concepts Limited imports South African Brands in
the Fast Food Industry
In 2003, Indigenous Franchise Systems were developed by a few
a owner operators (Tantalizers, Chicken Republic and Mr. Biggs)
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Matrix-Solicitors
STATISTICS OF FRANCHISE
SYSTEMS IN NIGERIA
Fast Foods
Imports (International Franchisors with Local Franchisee),
which consists of predominately South African brands ;
S/N
Name
No of units
International/Local
1
Chicken
Licken
5
International ( S.A )
2
St Elmos
3
International ( S.A )
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3 Chicken Republic
9
local
4 Butterfields
3
International ( S.A )
5 Barcelos
2
International ( S.A )
6 Mochados Chicken
Village
2
International ( S.A )
7 Steers
1
International ( S.A )
8 Debonairs
3
International ( S.A )
9 Churchs Chicken
1
International ( S.A )
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Matrix-Solicitors
10
Chicken Inn Fried
Chicken
2
International
(Zimbabwe)
11
Creamy Inn Ice Cream
2
International
(Zimbabwe)
12
Southern Fried Chicken 12
England
13
Mr. Biggs
10
Local
14
Tantalizers
3
Local
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Matrix-Solicitors
Retail
1
Woolworths
Department
1
International (SA)
2
Game
1
International (SA)
3
Addidas
5
USA
4
Shoprite
1
International (SA)
5
Nike
3
USA
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Services and Products
1
Sheraton Hotels
2
Hotel
2
Protea Hotels
4
Hotel
3
Le Meriden Hotels
3
Hotel
4
Hertz
5
Car Rental
5
Avis
7
Car Rental
6
Western Union
30
Financial Services
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Matrix-Solicitors
MAJOR CHALLENGES FACED BY
LOCAL OPERATORS

Government recognition and support

Support Structures

Legal and Regulatory Framework ( There is an absence of
franchise specific legislation)
There is a need for a presence of an interplay between many
areas of laws such as





Trademarks
Copyrights
Antitrust
Contract
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
Tax

Technology transfer issues

Currency control

Foreign investment

Import & Export restrictions

Dispute resolutions

Laws on multilateral and bilateral treaties

Property rights

Labour laws
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Matrix-Solicitors
1. The Judiciary
There is a lack of in-depth knowledge of Intellectual property (IP)
Laws
Violation of IP rights is on the high
There is a need for an amendment in our laws
Procedural bottlenecks
The courts need to be expeditious and judgments need to be sound
Better enforcement mechanisms must be put in place
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Matrix-Solicitors
2.
Lack of an enabling environment to wit:

Poor infrastructure

Port delays, strikes, short term funds, erratic electricity and
water supply, bad drainage and roads, insufficient support
structure

Lack of satisfactory transportation, communication and basic
utilities

Short term returns
3.
Capacity building and Human Resource is yet another major
challenge
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Matrix-Solicitors
FINANCE
1.
Equity funding through SMIEIS

SMIEIS aims for :

Employment generation

Value added production

Encourage movement to the formal sector

Develop equity investment culture
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Matrix-Solicitors
2.
Financing Franchising with SMIEIS funds

SMIEIS Funds can support franchising

Each franchise outlet - an SME - limited liability company
with at most N200 million asset base (excluding land and
working capital).

Resulting benefits to Venture Capital Fund

Benefits also to Franchisor / Franchisee
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Matrix-Solicitors
STATUS OF INTERNATIONAL FRANCHISE
SYSTEMS IN NIGERIA
ENTRY BARRIERS

Cultural and Consumer taste

The income levels

Political risk

Urbanization

Rule of Law

Regulatory Restrictions
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Matrix-Solicitors
CRITICAL SUCCESS FACTORS FOR THE
GROWTH OF FOREIGN BRANDS IN
NIGERIA

Customizing the realities in the local market

Transplanting their principles to suit the Nigerian market

To bring what is relevant to the needs of our market

Modifying their business systems to suit our environment
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Matrix-Solicitors
STRATEGIES FOR DEVELOPMENT OF
FRANCHISING IN NIGERIA

Building Franchise Capacity

Intellectual Property

Human Capital

Investment Capital

Enabling Environment
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CONCLUSION
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QUESTIONS
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