Community Pharmacy Franchise Agreement In Nigeria

Community Pharmacy Franchise

The Nigerian International Franchising Association (NIFA) defines franchising as a business arrangement whereby the franchisor grants the franchise operator (the "franchisee") the right to distribute certain products or services in a particular way, at a particular location and for specified periods of time. In return, the franchisee pays the franchisor fees and royalties.

Franchise Definition

A franchise simply refers to a situation whereby you or any other individual or group pays money to a company to enable them to use the company’s name, brand, and trademark to do business. Examples of successful franchises in Nigeria include Chicken Republic, Domino Pizza, Kentucky Fried Chicken (KFC), NNPC, Best Western Hotels etc.

Read Also: Success Tips For Community (Retail) Pharmacy Practice

However, the National Office for Technology Acquisition and Promotion Act, Chapter N62, Laws of the Federation of Nigeria, 2004 ("NOTAP Act") regulates the transfer of foreign technology to Nigeria. A franchise arrangement is regarded as involving the transfer of technology and so is regulated by the provisions of the NOTAP Act.

Registrable Agreement

1. use of trademarks;

2. use of patented inventions;

3. supply of technical expertise in the form of technical assistance of any description whatsoever;

4. supply of detailed engineering drawings;

5. supply of machinery and plant; and

6. provision of operating staff, managerial assistance, and the training of personnel.

To commence trading in Nigeria, a new business entity must fulfil the following requirements:

a. register with the Nigerian Investment Promotion Commission (applies only to companies with foreign participation);

b. open a corporate bank in a commercial bank in Nigeria and import capital; and

c. obtain a business permit and expatriate quota from the Ministry of Interior (applies only to companies with foreign participation and in cases where foreigners are to be employed).

The franchisor must register with the corporate affairs commission (CAC) with limited liability company public or private. Business name is not allowed.

Franchise In Community Pharmacy

When it comes to community pharmacy in Nigeria, there is a general fear on the use of franchise. It is only very few community pharmacies that have entered into franchise agreements. There is benefit for both parties. The most common franchise agreement in community pharmacy is the use of brand name. 

What To Consider

Before venturing into a franchise agreement, know that there is no law that backs it up. That means when disagreement occurs between both parties, the matter can only be settled with the general law of the land.

Consider the cost. The costs would include a franchise fee which you must pay to the franchisor. Other fees include a royalty fee, advertising fee and other ongoing fees which the franchisor demands from its franchisee.

Then find out if the franchisor supports the franchisee in any way. This includes help in location selection, design layout and promotion. Although, a franchisor that offers the above services adds it to the cost of franchise fee.

Read Also: How To Choose Good Location For Community Pharmacy Shop

The major thing to always include in the agreement is the frequency of renewal of the agreement and the likely percentage of increment of the franchise fee is any. Agreement for the transfer of technology must not exceed a term of 10 years. In practice, however, NOTAP usually approves a franchise agreement for a period of three years and upon its expiration, it may be renewed for further periods of three years.

Using the name of a popular community pharmacy in a new premises boosts the image of the place and instantly increases revenue. It also helps to bypass some taxes and the franchisor is billed for all that. Foreigners who wish to start a community pharmacy can use franchises. But they must follow the other laws for foreigners. Also, the community pharmacy must be registered with the Pharmacists Council of Nigeria (PCN).