Franchising is a business model in which a franchisor, who owns a registered trademark, grants the right to use that trademark and the associated business system to a franchisee. In return, the franchisee pays an initial fee and ongoing royalties to the franchisor.
In Kenya, franchising is governed by the Industrial Property Act of 2001, which provides the framework for the registration, protection, and enforcement of trademarks. Under this Act, a trademark owner can grant licenses to use the trademark to others, but the use must be consistent with the registered trademark and the agreement should be in writing.
The franchisor typically provides the franchisee with a detailed business model, which includes the use of the franchisor’s trademark, logo, and branding, as well as specific guidelines for operating the business, such as products and services to be offered, marketing and advertising strategies, and employee training programs.
Franchising can be a beneficial business model for both the franchisor and the franchisee. For the franchisor, it can provide a way to expand the business rapidly and efficiently, while also generating income from franchise fees and royalties. For the franchisee, it can provide a proven business model, established branding and marketing, and support and training, which can help to reduce the risk and increase the chances of success in starting a business.
However, it is important for both the franchisor and the franchisee to fully understand the terms and conditions of the franchise agreement, as well as the legal and regulatory requirements of franchising in Kenya. The franchisor should ensure that the franchise agreement is legally compliant and that it clearly defines the rights and responsibilities of both parties. The franchisee should carefully review the franchise agreement, and seek legal and financial advice before signing it.
In Kenya, the registration of the trademark must be done with the Kenya Industrial Property Institute (KIPI) which is the government body responsible for the registration and enforcement of trademarks, patents and industrial designs. The franchisor must also be in good standing with the KIPI and should have a valid registration.
In conclusion, Franchising is a business model in which a franchisor, who owns a registered trademark, grants the right to use that trademark and the associated business system to a franchisee. In Kenya, franchising is governed by the Industrial Property Act of 2001 and the registration of the trademark must be done with the Kenya Industrial Property Institute (KIPI). It can provide a way for the franchisor to expand the business rapidly and efficiently and for the franchisee, it can provide a proven business model, established branding and marketing, and support and training which can help to reduce the risk and increase the chances of success in starting a business. It is important for both the franchisor and the franchisee to fully understand the terms and conditions of the franchise agreement, as well as the legal and regulatory requirements of franchising in Kenya.
Shafiq Taibjee
Lawyer/Arbitrator/Mediator/Certified Islamic Arbitrator and Expert
Honorary Fellow IICRA –UAE