Franchise Law

Purpose and scope

• Governs franchise agreements in which the franchisor grants another the right to use its brand and business system for fees, aiming at transparency and protection of both sides.
• It applies to franchises operated in the Kingdom, whether the franchisor is Saudi or foreign.

Key rules, rights and obligations

• The franchisor must give the prospective franchisee a disclosure document with details of the franchise, financial obligations, history and any material litigation, a sufficient period before signing as set by the law.
• The franchise agreement must be in writing and include the essential terms such as rights granted, fees, term, territory, renewal and termination.
• The agreement is registered with the Ministry of Commerce under the procedures set by the regulation.
• The franchisor provides training and technical support; the franchisee maintains quality standards and confidentiality.
• The law sets the cases for early termination and the parties' rights on termination or non-renewal.

Violations, penalties and common problems

• A breach of disclosure or misleading information entitles the harmed party to compensation and may allow rescission.
• Common problems: entering a franchise without studying real operating costs, broad non-compete clauses, and disputes over territory.
• The Ministry imposes penalties, including fines, for breaches of the law.

Procedures and key deadlines

• Review the disclosure document and draft agreement with a lawyer before signing and paying fees.
• Check that the franchise is registered with the Ministry of Commerce before contracting.
• State clearly in the agreement how disputes are settled and the governing law.

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.