A brand sought to expand in Saudi Arabia by granting franchise rights to local investors, but faced significant challenges concerning compliance with statutory grant conditions, the risks of offering the franchise opportunity before completing the disclosure document, and the absence of contractual controls governing online sales channels, supply, termination, and exit arrangements.
Work sample date
October 2026
Jurisdiction
Saudi Arabia
Work type
Guidance Guide
Document language
Arabic
Client type
Study prepared at the request of a company
The matter
Key regulatory challenges and gaps
Premature offering of the opportunity: commencing franchise marketing and collecting initial reservation payments before verifying compliance with the statutory operation requirement—at least one year through two persons or at two different outlets—and before delivering the disclosure document within the statutory period.
Failure to update disclosure requirements: relying on outdated disclosure templates that do not reflect the latest ministerial amendments, including Decision No. 339 of 2023, or presenting financial projections and separate marketing materials without stating the material assumptions.
Ambiguity in operational and territorial rights: defining the geographic scope only by reference to the “city,” without regulating sales rights through delivery platforms and e-commerce, and leaving the mechanism for updating the “operating manuals” open in a manner that may affect core financial obligations.
Risks of an unregulated exit: the absence of a clear mechanism for addressing contract expiry or refusal to renew, and the resulting obligations to repurchase physical assets or potential compensation claims.
Work performed
Legal intervention and applied methodology (in accordance with the CounselO Legal Guide)
The project was comprehensively restructured through carefully controlled implementation steps based on the Franchise Law and its Implementing Regulations:
Documenting grant eligibility and prior disclosure: establishing an operational-experience evidence file, including operating records, invoices, and outlet licences, together with the chain of title for the trademark; preparing a disclosure document containing all 16 required elements in accordance with the amended annex; and controlling its delivery so that it occurs at least 14 days before signing any document or paying any consideration.
Building an integrated contractual structure: drafting the franchise agreement in Arabic and linking it to defined implementation annexes, including a territory and channels matrix, a fees schedule and percentage-calculation basis, a training plan, and a list of approved suppliers and quality standards, to ensure document consistency and prevent conflict with the disclosure document.
Governing registration and continuing obligations: establishing an obligations calendar to ensure registration of the agreement and disclosure document with the Ministry of Commerce within 90 days of signing; regulating reports for a joint marketing account, if established, within four months from the end of the financial year; and observing the Competition Law and the Personal Data Protection Law.
Securing renewal and exit arrangements: controlling renewal-notice deadlines—180 days before expiry as a statutory default—and the conditions for assignment and change of control; and establishing an inventory register for physical assets, with their invoices and accumulated depreciation recorded from the beginning of the project, to regulate repurchase rights within the statutory 60-day periods upon expiry.
Outcome or value delivered
Strengthening the contractual relationship: protecting the franchisor against the risk of invalidity of provisions that violate the law, as well as against termination of the agreement and compensation claims arising from a material failure to disclose or register, pursuant to Articles 17, 19, and 23 of the Law.
Clarity in investment decisions: enabling the franchisee to understand its financial and operational obligations accurately and to conduct its business with commercial independence under a disciplined and measurable business model.
Network sustainability: transforming the relationship from general, dispute-prone provisions into documented operating procedures and records covering the entire franchise lifecycle, from establishment through a safe exit.
For full details, checklists, and guidance templates, you may download the [Comprehensive Guide to the Franchise Agreement under the Saudi Legal System] issued by the CounselO Legal platform.
This sample demonstrates professional experience only. Details may be modified or withheld to protect confidentiality, and past work or outcomes do not guarantee the result of another matter.
