The Franchise Boom in Kenya and the Regulatory Framework

The Franchise Boom in Kenya and the Regulatory Framework

Kenya’s franchise sector is booming—discover the opportunities, key players, and essential regulations shaping this dynamic market

Kenya is experiencing a remarkable boom in the franchise sector, driven by a rapidly growing middle class, increasing urbanization, and digital penetration. Both local and international brands, particularly in the fast-food, retail, and service sectors, are multiplying, reflecting strong consumer demand.

Concrete Examples of the Appeal of Franchising in Kenya

The Kenyan market has proven to be particularly conducive to the establishment of franchises in the hospitality and restaurant sectors. Well-known international brands have entered and are thriving, including:

Fast Food and Cafés

Giants like KFC, Domino's Pizza, Burger King, and Subway have established a strong presence, often located in major shopping malls in key cities like Nairobi, Mombasa, and Kisumu. They are capitalizing on the changing consumption habits of Kenyans, particularly the trend of eating out. Local brands like Java House have also expanded their footprint using the franchise model.

Hospitality

The hotel sector is also a growth driver. Major global brands such as Marriott International, Radisson, and Kempinski have opened franchised or licensed establishments, meeting a growing demand for quality services from both tourists and business travelers.

Other Sectors

Success is not limited to food and hospitality. Other industries like furniture (Ashley Furniture), real estate (Re-Max Real Estate), and cleaning or wellness services are also seeing the development of franchise models, proving the diversity and potential of the Kenyan market.

Despite this positive momentum, the country does not have specific legislation to govern franchising. Market players must therefore rely on a set of existing laws and common law principles to frame their agreements.

Summary of Applicable Franchise Regulations in Kenya

Contract Law

The Law of Contract Act governs franchise agreements, which are, first and foremost, contracts. The clauses of these agreements must comply with the basic principles of contract law.

Competition Law

The Competition Act is a key piece of legislation. It prohibits anti-competitive agreements, and franchise agreements must be structured in a way that does not violate this law.

Intellectual Property

The core of a franchise is its intellectual property, which is protected by several laws:

  • Trademarks Act: For the protection of trademarks. Registration with the Kenya Industrial Property Institute (KIPI) is crucial.
  • Copyright Act: For operational manuals and other copyrighted works.

Taxation

  • Withholding Tax: Applies to royalties paid by the franchisee to the franchisor. The rate is 5% for a resident franchisor and 20% for a non-resident.
  • VAT (Value Added Tax): A 16% VAT is applicable, particularly on imported franchise services.

Consumer Protection

The Consumer Protection Act can offer protection to franchisees in the event of unfair business practices by the franchisor.

For a more detailed look at franchise regulations in Kenya, read our full article here.