KFC, Domino’s, and Mr Price all operate in Kenya as franchises, and the local franchise sector has grown well beyond these familiar international names. What surprises many people entering it, franchisor and franchisee alike, is that franchise agreements in Kenya are not governed by a franchise law at all. There is no dedicated statute, no franchise registration authority, and no mandatory pre-contractual disclosure regime. What actually regulates a Kenyan franchise is the intellectual property licensing framework underneath it, dressed up in commercial language.

There Is No Franchise Act, and That Is the Point

Franchising in Kenya operates under ordinary contract law, principally the Law of Contract Act, supplemented by whichever other statutes happen to touch the specific arrangement: the Competition Act where the agreement contains restrictive terms, the Consumer Protection Act, the Data Protection Act, 2019 where customer data is shared between franchisor and franchisee, and the Income Tax Act where franchise fees or royalties are paid to a franchisor outside Kenya and attract withholding tax. Unlike jurisdictions with franchise-specific disclosure regimes, Kenya imposes no obligation on a franchisor to provide a prospective franchisee with a standardised disclosure document before signing. The governing principle is closer to caveat emptor, and a prospective franchisee’s protection comes entirely from what they negotiate into the agreement and what due diligence they carry out beforehand, not from a statutory floor.

The Kenya Franchise Association exists as an industry body promoting best practice, but it is not a regulator and has no statutory enforcement powers. This means the quality of a Kenyan franchise relationship depends almost entirely on the drafting of the individual agreement, which is precisely why franchise disputes here tend to turn on ordinary contract interpretation rather than any franchise-specific rule.

The Real Legal Mechanism: Trademark Licensing

What a franchise agreement actually does, legally, is licence a bundle of intellectual property, principally the franchisor’s trademark, alongside copyright in operating manuals, marketing materials, and training content, and often confidential business methods protected the same way as any other trade secret. The statutory hook for the trademark side is section 31 of the Trade Marks Act, Cap. 506, which provides for “registered users”: a franchisee can be recorded on the trademark register as a registered user of the franchisor’s mark, formalising what is otherwise just a contractual permission to trade under someone else’s brand. A franchisor should register its trademark in Kenya before franchising begins, since trademark rights are territorial and a mark registered abroad gives no protection here.

Because there is no franchise-specific statute filling in the gaps, the franchise agreement itself has to do considerably more work than it would in a jurisdiction with a mature franchise code. It needs to define precisely what is being licensed and on what terms, set quality control standards the franchisor can actually enforce (courts are more receptive to trademark and unfair competition claims where the franchisor demonstrably controlled quality, since a licence without quality control can weaken the mark itself), address territory and exclusivity, set out fee and royalty structures and how withholding tax on cross-border payments is handled, and specify post-termination obligations, including the franchisee’s duty to stop using the mark, return or destroy branded materials, and observe a non-compete period, again subject to Kenya’s ordinary restraint-of-trade reasonableness test.

Where Franchisors Underestimate the Risk

The most common failure is not in the headline commercial terms but in what happens when the relationship ends. Because Kenya has no statutory franchise termination regime, a franchisor’s ability to stop a former franchisee from continuing to trade under its branding, or from opening a near-identical competing outlet, depends entirely on the enforceability of the termination and non-compete clauses drafted into the original agreement. A poorly drafted or unreasonably broad restrictive covenant risks being struck down or narrowed by a Kenyan court applying the restraint-of-trade doctrine, leaving the franchisor with a former partner who knows the business model, has the training materials, and is no longer bound by the brand.

How We Can Help

Clay & Associates Advocates advises franchisors and franchisees on structuring Kenyan franchise agreements, registering and licensing the underlying trademarks, and drafting enforceable termination and non-compete terms. Our guide to IP asset registers and what investors actually diligence is a useful companion for franchisors preparing their brand for expansion. Contact our Intellectual Property practice to review or draft a franchise agreement.

Sources: Trade Marks Act, Cap. 506, section 31; Law of Contract Act, Cap. 23; Competition Act, 2010, section 21(1); Data Protection Act, 2019.

Frequently asked questions

Is there a law specifically regulating franchises in Kenya?
No. Kenya has no dedicated franchise legislation. Franchise agreements are governed by general contract law, supplemented by the Trade Marks Act, Competition Act, Consumer Protection Act, Data Protection Act, and Income Tax Act as relevant to the specific arrangement.

Does a franchisor have to disclose financial information to a prospective franchisee before signing?
There is no statutory pre-contractual disclosure requirement in Kenya, unlike jurisdictions with franchise disclosure document regimes. Any disclosure obligation has to be negotiated into the agreement itself.

How does a franchisee legally get the right to use the franchisor’s brand?
Through a trademark licence, which can be formalised by recording the franchisee as a “registered user” of the mark under section 31 of the Trade Marks Act, alongside the franchise agreement itself.

What happens if a franchisee keeps trading under the brand after termination?
The franchisor’s remedy depends on the termination and post-termination clauses in the original agreement. Without a statutory franchise termination regime, enforceability comes down to ordinary contract and trademark infringement principles, and the reasonableness of any restrictive covenant.