How to start a franchise in Nigeria

A franchise is a permission given to a person or firm to sell a company’s goods or services in a specific location for a given period. To receive a franchise, you must pay money to a reputable company to use its name, brand, and trademark to operate a business. Most Individuals want to own their own business but do not want to start a business from the beginning because it is difficult. A franchise will allow you to own a company that is already profitable and popular with certain conditions.

In this post, you will discover top international franchise opportunities in Nigeria. I will explain steps for setting up a franchise in Nigeria and what it costs to own a fast-food franchise business in Nigeria, and one other brand. Let us kick off this tutorial.

 

Terms you should know about franchise

The company that gave you its name to use is called “franchisor,” and you that rented the name is known as the “franchisee,” and the money you pay to use the brand is known as the “franchise fee.” A franchise allows you to borrow the name of a famous brand and run a business according to the brand’s culture, with other conditions attached apart from paying the franchise fee to rent the brand.

 

What are the most popular franchise opportunities in Nigeria?

Though there are local and international franchises for different businesses, the most popular international franchises in Nigeria is the hotel, food, and restaurant industry franchises.

Local franchises exist in many business sectors like petroleum, transport, logistics, education, movies, hospitals, and restaurants. For example, NNPC offers a franchise to petrol marketing stations, Nobel carpets, Mr. Biggs, and ABC transport all offer franchises to entrepreneurs, to mention but a few.

The franchise market in Nigeria is said to bring annual revenue of one hundred billion dollars. The foreign franchises are mainly of US, South African, and European origin, and the demands for international brands continue to grow.

 

How to start a franchise in Nigeria

Follow these steps to start a franchise in Nigeria:

 

Step 1: Find out the advantages and disadvantages of investing in a Franchise

The benefits of getting a Franchise include starting a business using a brand that is known all over the country and has a record of accomplishment. You have the support of the Franchisor, who will provide you with business advice, training, and advertising to make sure you succeed.

While disadvantages include the substantial cost of getting a franchise, other fees, hiring staff, high cost of leasing a shop and buying equipment, inventory, obtaining business licenses, and insurance.

 

Step 2: Choose a franchise that suits your competence and objectives.

Any of the top international franchise opportunities in Nigeria could be right for you. But, think about your ability and pick a franchise where your strengths are more than your weaknesses.

There are franchises in different industries, consider that and do not just jump into anyone because of the profit motive. Align the Franchise with your business goals and use the purchase of a franchise to reach those objectives.

 

Step 3: Choose a business platform to Incorporate between an LLC or Sole Proprietorship.

If you start your Franchise using a limited liability company (LLC), you will have legal, tax, and business advantages. For instance, you are separate from your business, and that separation protects your assets.

You are more credible when you start a business as a corporation or LLC. Also, Franchisors prefer doing business with you than if you used a sole proprietorship where you have unlimited liability.

 

Step 4: Research franchise opportunities and market conditions

Study your local environment to discover what businesses will thrive in that locality. Get research information from credible sources, and do not just rely on instincts. Get data from Government agencies, like small Business Administration (SBA), private research firms, local business schools, and universities.

Confirm Franchisor’s ranking. Also, a franchisor must provide a Disclosure Document by law. Contact franchisee that left the Franchisor to find out why they left. Ask questions like:

• What is the level of experience the Franchisor has?
• What is the starting cost and running cost of the Franchise?
• What is the duration it takes to start making a profit on the Franchise?
• What kind of support does the Franchisor offer their franchisees?

Getting objective answers to these questions, we allow you to decide if the Franchise you are interested in joining is the right one for you. Or, if owning a business using any top international franchise opportunities in Nigeria is the best option for you.

 

Step 5: Write a business plan

If you cross the hurdle of the selection of a franchise, then you will need to prepare a document that you can use to market your new business proposal to financiers. Write a proper business plan to evaluate the investment and get set for pitching to investors and banks for funding.

Also, the business plan will let you document the entire business, so you know the exact amount you need to start, sources of funding, equipment to buy, number of staff to hire, fees to pay and working capital, and year of breakeven.

 

Step 6: Get funding

To run a franchise, you must have enough funding to start the business due to the high cost of opening the business. Think about startup cost, franchise fee and equipment, and working capital and how to get funds.

Approach your local banks and see if you can apply for the small-medium scale funds provided by the Central Bank of Nigeria and ask family and friends.

The loans run into millions of naira ranging from N50 million to 500 million depending on the Franchisor you choose. If you have collateral and meet other conditions set by the lender, you could get a loan. If you can get the funding, then you are almost ready to start your Franchise with any top international franchise opportunities in Nigeria.

 

Step 7: Evaluate and sign the franchise contract

Reviewing the contract is critical to your success or failure in the business, so scrutinize the terms and conditions like you would when you are signing a loan agreement. Signing a franchise agreement binds you and the Franchisor, so let your Lawyer go through the document before you sign it. Learn about your rights and obligations and all the essential terms of the agreement.

 

Step 8: Meet business performance obligations

Get state and local government licenses and permits before you start the business. The usual business licenses include tax registrations, health permits, and occupational licenses. Get permits as failure to pay for licenses and permits can result in government fines or worse the termination of your Franchise for failing to pay for necessary permits.

Also, submit a copy of your company’s annual audited reports to the registrar of business at the Corporate Affairs Commission if you an LLC.

 

Step 9: Build or renovate your shop, join training, and employ staff

Hire a space to start operating the business. The Franchisor will only provide you with the blueprints, custom fixtures, and signage for the opening day. Also, you need to hire staff, and the Franchisor will train you and your team to introduce the culture of the Franchise to you.

 

Step 10: Open your new franchise for business

When you open your Franchise to the public, you will enjoy the Franchisor’s help, as they will mount massive advertising campaigns to let the world know that your Franchise is open for business. Invite your local chamber of commerce, business networking groups, and inform top members of the business community that you are open.

 

What is the cost of owning a fast-food franchise business in Nigeria?

If you invest in any top international franchise in Nigeria, be ready to pay for it. For instance, a fast-food franchise is lucrative, but the barrier to entry is the high franchise fee you must pay.

The figures are astonishing for the average entrepreneur. We will list the most popular franchises and give you a summary of the fees alongside.

 

Top international franchise opportunities in Nigeria

Here are the top international franchise opportunities in Nigeria:

1. McDonald’s (Restaurant)

Most owners or operators join the Macdonald’s Franchise by buying an existing restaurant straight from McDonald’s or a McDonald’s owner/operator. But a few new operators choose to buy a new facility, but that would cost you a considerable amount of an initial down payment of 40 percent instead of 25 percent for an available restaurant.

 

You and your team will receive thorough training to learn how to run a McDonald’s restaurant. McDonald’s owners or operators have access to the company’s recognized lender relationships to provide you with low lending rates in the industry. The minimum financial requirements in cash are – N306,000,000. Learn more.

 

2. Pizza Hut (Restaurant)

At Pizza Hut, an entrepreneur having $360,000 in liquid assets and a budget starting from $1.3 million to $3 million, plus a net worth of $1 million, can start the Pizza Hut business in a year.

But you must pay a franchise fee of $25,000, and a service fee of 6 percent of gross sales, including an advertising fee of 2.5 percent to 3 percent of total sales. You must also commit to building at least three restaurants in three years. The minimum financial requirements in cash are – $1,300,000. Contact Pizza Hut.

3. ReMax (Real estate professionals)

The cost of opening a ReMax franchise varies due to location, and the demand for the ReMax franchise at any point, equipment, and price of leasing a building. Their agreement lasts for five years with a renewal option that depends on the performance of the initial contract.

In the franchising agreement with ReMax, operating costs or expenses to open an office is not included. Also, some ReMax agents pay a continuing royalty fee of $100 monthly and 2.5 percent of commissions.

Each agent must pay annual dues of $165, and $105 monthly for advertising. They use this money for building the ReMax brand name and for a national and regional media blitz.

The location of your ReMax franchise determines if you will pay a royalty fee based entirely on sales.  The minimum financial requirements in cash are – N120,732,300. Learn more.

 

4. KFC Corporation (Restaurant)

The KFC franchise is one of the top international franchise opportunities in Nigeria, which look affordable compared to the other restaurants. KFC Corporation (KFCLLC) parent name is the YUM! Brands, Inc. It runs a dine-in and takeaway KFC channel, which cooks and sells chicken and other items on their menu that KFCLLC authorizes.

The Franchise Agreement offers the franchisees a license to use precise KFC trademarks, trade names, service marks, logos, and commercial symbols KFC regularly authorizes, including the “KFC” and “Kentucky Fried Chicken” marks.

The agreement also allows the franchisee to use the registered business formats, systems, methods, designs, layouts, standards, and conditions the Franchisor approves, solely for the operation of the Channel. The minimum financial requirements in cash are – N45,000,000. Contact KFC.

 

5. Wendy’s (Restaurant)

You must have $2 million in liquid assets plus $5 million net worth for a brand-new Wendy’s multiunit franchisees or franchise groups. You must pay a franchise fee of $40,000 for a restaurant, a royalty fee of 4 percent.

Also, you must pay an advertising fee of 4 percent, but presently if you want to buy a franchise, you can only obtain international and Canadian franchises. The minimum financial requirements in cash are $2,200,000. Learn more.

 

Top local companies that offer franchise in Nigeria

Here are Nigerian companies that offer franchise opportunities:

1. Nigerian National Petroleum Corporation (NNPC)
2. United Africa Company of Nigeria (UAC).  They owned the Mr.Bigg brand
3. ABC transport
4. Nobel Carpets
5. Oando PLC

 

Conclusion

This article gave you a list of top international and local franchise opportunities in Nigeria. Also, I explained steps for setting up a franchise in Nigeria and the cost of owning a fast-food franchise business in Nigeria, including a real estate franchise. Use this information to launch your franchise business now, if the high cost of setting up a Franchise is acceptable.