1. CHALLENGES OF FRANCHISING IN NIGERIA VALERIE OGBUAH MATRIX-SOLICITORS UBA HOUSE, 6 TH FLOOR MARINA, LAGOS 01-2647971; 2601287-9 HOW TO SUPPORT AND CONDUCT FRANCHISING FOR EFFECTIVE ECONOMIC DEVELOPMENT JOINT AFRICAN INSTITUTE NOVEMBER 20-23 2005 CAIRO, EGYPT

2. 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

3. 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 Valerie Ogbuah Matrix-Solicitors

4. 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) Valerie Ogbuah Matrix-Solicitors

5. 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

6. 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) Valerie Ogbuah Matrix-Solicitors

7. STATISTICS OF FRANCHISE SYSTEMS IN NIGERIA Fast Foods Imports (International Franchisors with Local Franchisee), which consists of predominately South African brands ; S/NName No of units International/Local 1Chicken Licken Licken5 International ( S.A ) 2 St Elmos 3 International ( S.A ) Valerie Ogbuah Matrix-Solicitors

8. 3 Chicken Republic 9local 4Butterfields3 International ( S.A ) 5Barcelos2 6 Mochados Chicken Village 2 International ( S.A ) 7Steers1 8Debonairs3 9 Churchs Chicken 1 International ( S.A ) Valerie Ogbuah Matrix-Solicitors

9. 10 Chicken Inn Fried Chicken 2 International (Zimbabwe) 11 Creamy Inn Ice Cream 2 International (Zimbabwe) 12 Southern Fried Chicken 12England 13 Mr. Biggs 10Local 14Tantalizers3Local Valerie Ogbuah Matrix-Solicitors

10. Retail 1 Woolworths Department 1 International (SA) 2Game1 3 Addidas Addidas5USA 4Shoprite1 International (SA) 5Nike3USA Valerie Ogbuah Matrix-Solicitors

11. Services and Products 1 Sheraton Hotels 2Hotel 2 Protea Hotels 4Hotel 3 Le Meriden Hotels 3Hotel 4Hertz5 Car Rental 5Avis7 6 Western Union 30 Financial Services Valerie Ogbuah Matrix-Solicitors

12. MAJOR CHALLENGES FACED BY LOCAL OPERATORS Government recognition and support Government recognition and support Support Structures Support Structures Legal and Regulatory Framework ( There is an absence of franchise specific legislation) 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 There is a need for a presence of an interplay between many areas of laws such as  Trademarks  Copyrights  Antitrust  Contract Valerie Ogbuah Matrix-Solicitors

13.  Tax  Technology transfer issues  Currency control  Foreign investment  Import & Export restrictions  Dispute resolutions  Laws on multilateral and bilateral treaties  Property rights  Labour laws Valerie Ogbuah Matrix-Solicitors

14. 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 Valerie Ogbuah Matrix-Solicitors

15. 2. Lack of an enabling environment to wit: Poor infrastructure Poor infrastructure Port delays, strikes, short term funds, erratic electricity and water supply, bad drainage and roads, insufficient support structure 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 Lack of satisfactory transportation, communication and basic utilities Short term returns Short term returns 3. Capacity building and Human Resource is yet another major challenge Valerie Ogbuah Matrix-Solicitors

16. 1. Equity funding through SMIEIS SMIEIS aims for : SMIEIS aims for : Employment generation Employment generation Value added production Value added production Encourage movement to the formal sector Encourage movement to the formal sector Develop equity investment culture Develop equity investment culture Valerie Ogbuah Matrix-Solicitors FINANCE

17. 2. Financing Franchising with SMIEIS funds SMIEIS Funds can support franchising 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). 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 Resulting benefits to Venture Capital Fund Benefits also to Franchisor / Franchisee Benefits also to Franchisor / Franchisee Valerie Ogbuah Matrix-Solicitors

18. STATUS OF INTERNATIONAL FRANCHISE SYSTEMS IN NIGERIA ENTRY BARRIERS Cultural and Consumer taste Cultural and Consumer taste The income levels The income levels Political risk Political risk Urbanization Urbanization Rule of Law Rule of Law Regulatory Restrictions Regulatory Restrictions Valerie Ogbuah Matrix-Solicitors

19. CRITICAL SUCCESS FACTORS FOR THE GROWTH OF FOREIGN BRANDS IN NIGERIA Customizing the realities in the local market Customizing the realities in the local market Transplanting their principles to suit the Nigerian market Transplanting their principles to suit the Nigerian market To bring what is relevant to the needs of our market To bring what is relevant to the needs of our market Modifying their business systems to suit our environment Modifying their business systems to suit our environment Valerie Ogbuah Matrix-Solicitors

20. STRATEGIES FOR DEVELOPMENT OF FRANCHISING IN NIGERIA Building Franchise Capacity Building Franchise Capacity Intellectual Property Intellectual Property Human Capital Human Capital Investment Capital Investment Capital Enabling Environment Enabling Environment Valerie Ogbuah Matrix-Solicitors

21. CONCLUSION Valerie Ogbuah Matrix-Solicitors

22. QUESTIONS Valerie Ogbuah Matrix-Solicitors