Saudi Arabia: latest developments – what do franchisors need to know?

Interestingly, consumers are looking beyond western brands, and we have seen Asian franchisors establish a presence in the Kingdom through franchising. Further, the authorities are active in recruiting additional franchise brands to establish a presence in the Kingdom.

In the first of its kind across the GCC region, the Kingdom introduced last year the commercial franchise law which mandates (amongst other things) disclosure and registration requirements. Given the new requirements in Saudi Arabia under the Franchise Law, many franchise deals are now taking much longer than before.

The costs involved in doing a franchise deal in Saudi have also greatly increased. The disclosure document and the franchise agreement must be translated into Arabic and then must be registered with governmental authorities. The documentation for registration must be legalised and notarised in the franchisor’s home country - this can take time and therefore there it can be challenging to meet the requirement under the new law that registration must come into effect within 90 days of the date of signing the franchise agreement. Franchise agreements used in Saudi deals must be carefully reviewed to ensure they comply with the requirements of the new law on the parties’ obligations and termination provisions. It is essential that franchisors, wherever they are based, seek experienced legal counsel when undertaking a franchise deal in Saudi Arabia.