Franchise Law in Saudi Arabia: Conditions and Rights

You pay a sum to join a well-known brand and start fitting out your branch. Then you discover that the training or supply you expected requires a separate agreement. Or you own a successful restaurant and want to sell your concept as a franchise to investors in other cities, but you do not know what the law requires from you before the first offer.

The short answer: the Franchise Law prohibits offering or granting a franchise before the business model has been operated for at least one year by two persons or in two different outlets (Article 5), although a Cabinet decision of January 2026 exempts some franchisors from this condition. The franchisor must deliver the disclosure document at least 14 days before signing or before the first payment, whichever comes first (Article 7), and register the agreement and the document with the Ministry of Commerce within 90 days of signing (Article 3 of the Implementing Regulations). The franchisee has rights that cannot be waived in advance, including protection from termination without a legitimate reason.

What is a franchise under Saudi law?

A franchise is where the franchisor grants another person the right to carry on a business for his own account, linked to the franchisor's trademark or trade name, with the franchisor providing know-how and technical knowledge and setting the method of operation, in return for financial or non-financial consideration (Article 1). The following are not franchises: a contract limited to selling goods or licensing a trademark, a commercial agency, or an arrangement where the franchisee is wholly owned by the franchisor (Article 4). The law applies to every franchise agreement performed in the Kingdom (Article 3).

In practice, do not start by comparing the entry fee alone. Ask what it covers: site fit-out, training, systems, supply and marketing. Then compare what the offer says with what the contract will say. A phrase like "full support" does not help you estimate the cost of running the branch unless the services and their timing are clear.

What are the conditions for offering a franchise in Saudi Arabia?

A franchise may not be offered or granted until the franchise business has been operated under the business model for at least one year, by two persons or in at least two different outlets. One of them may be the franchisor or a member of its group. If the franchisor does not operate the business in the Kingdom itself, a master franchisee may not grant sub-franchises until the business has been operated in the Kingdom for at least one year. The Minister may change these periods (Article 5). In January 2026 the Council of Ministers decided that this condition (Article 5, paragraph 1) does not apply to some franchisors and franchisees that meet specific criteria. The main ones: the business is in one of the promising sectors targeted by Vision 2030, it has a detailed and clear franchise business model, the activity is innovative, and no franchise fees are collected before the franchisee starts earning revenue. The decision is applied by a committee chaired by the Ministry of Commerce.

This decision relies on the Royal Decree issuing the law, which allows the Council of Ministers to exempt certain categories of franchisors and franchisees from some requirements, depending on the sector, the type of activity and the size of its operators (Item Three of Royal Decree M/22 of 1441H). If you are told your brand is exempt, ask for proof that the committee accepted it.

Disclosure and registration

Article 7 requires delivery of the disclosure document at least 14 days before the agreement is signed or before any payment for the franchise, whichever comes first. Keep proof of receipt and of the date of the first payment, and do not settle for a short project presentation.

The franchisor must register every signed franchise agreement, together with the disclosure document, with the Ministry of Commerce within 90 days of signing. The registration fee is SAR 500 (Articles 3 and 4 of the Implementing Regulations). If something material in the document changes after delivery and before signing, the franchisor must deliver a new document or a statement of the changes before signing or payment (Article 6 of the Regulations).

Note an important amendment: the item "information on the franchisor's financial position" was removed from the disclosure document requirements by Ministerial Resolution No. 339 of 1444H. So it is not correct to copy an old list and say that providing the franchisor's financial statements is a current obligation under this item. The investor can still ask for additional information and negotiate it before committing.

What must a Saudi franchise agreement include?

Under Article 11, the agreement must be in writing, signed and in Arabic. If it is written in another language, it must have a certified Arabic translation. It sets out the activity, the term, the territory, the fees, training and support, supply, intellectual property rights and dispute resolution.

When reviewing, turn each clause into a practical question: is the royalty calculated on sales before or after returns? Who pays for local advertising? Are there mandatory purchases? What happens to the equipment and stock when the relationship ends? These are questions for negotiation and review; not all of them are automatic rights.

What are the rights of the franchisor and the franchisee during operation?

Article 8 requires the franchisor, unless otherwise agreed in writing, to define the business model and provide operating manuals, train the franchisee's staff, provide technical and marketing know-how, supply the franchise goods and services throughout the agreement, keep the franchisee's financial data confidential, and not open a similar business or grant the right to others in the agreed territory. Article 9 requires the franchisee to obtain the franchisor's approval before changing products, the method of work or the location, to provide the necessary data, and to allow the franchisor to inspect without disrupting the business. Both parties must perform their obligations in good faith (Article 10).

Any agreement by which the franchisee gives up in advance any of his rights under the law is void, unless it is part of a final settlement with the franchisor or permitted by the law (Article 23). So a clause such as "the franchisee waives any compensation" signed at the start is usually not enforceable.

What if the branch struggles or the relationship ends?

The franchisor may not terminate the agreement before its term without the franchisee's consent except for a legitimate reason, such as a material breach not fixed within 14 days of written notice, or stopping the business for more than 90 consecutive days (Article 18). If the franchisor terminates in breach of this, it must buy back the assets used exclusively in the franchise and compensate the franchisee (Article 20). The parties may agree on arbitration or mediation to settle disputes (Article 25).

A restaurant opening is delayed because the equipment did not arrive. The franchisee needs to prove the equipment order, the supply date and the effect of the delay. The franchisor needs to show who was responsible for buying the equipment, and whether the site specifications or payment caused the delay. A new delivery schedule and an agreed treatment of the disputed costs may suit both parties better than ending the relationship immediately.

This is general information based on the official Arabic texts of Saudi laws, which prevail over any translation. It is not legal advice for your specific case.

Practical solutions for both sides

If you are the investor taking the franchise:

• Ask for the full disclosure document and record the date you received it. Do not pay before 14 days have passed.
• Check that the brand has operated for at least one year in two outlets, or ask for proof that the Ministry of Commerce committee accepted it under the exemption from the one-year condition.
• Prepare your own cost table with three sales scenarios before signing.
• Make sure the contract is in Arabic or has a certified translation, and that the territory is defined on a map.

If you own the brand and want to grant franchises:

• Document the year of operation in two outlets before advertising the opportunity.
• Prepare a disclosure document under the amended annex, and deliver it with proof of the date.
• Register the agreement and the document with the Ministry of Commerce within 90 days of signing.
• Write the termination reasons and notice procedures clearly. Terminating without a legitimate reason will cost you the buy-back of assets and compensation.

Whether you are granting or taking a franchise, send us the offer or the draft contract and the disclosure document on WhatsApp, and we will review with you what is missing before you commit.