Arab Franchise Times

Sherif El Akaad

Founder of MAK Law Firm.

“A Summary of the Legal Framework of Franchising in the Kingdom”
A keen observer of Saudi Arabian laws will note that there are several legal ways for non-Saudis to conduct business in the country, including through direct investment by opening a company and obtaining a foreign investment license, and then obtaining a commercial registration for the company.
Additionally, contracts can be signed between foreign parties
and Saudi parties, such as agency or commercial distribution
contracts, provision of support and services contracts, and franchising contracts.
One of the key goals of the Kingdom’s Vision 2030 is to diversify the state’s revenue sources and develop non- oil sources to prevent economic crises that may result from relying solely on oil sources. As part of this effort,

the Kingdom has focused on developing franchising as a non-oil revenue source, along with the legal and business environment surrounding it.
Those familiar with the legal framework of franchising in
the Kingdom know that it was first regulated in Minister of Commerce Decision No. (1012) dated 1992. This decision stated that the provisions of the Commercial Agency Law and its regulations apply to franchising contracts, and that they must be registered in the Commercial Agency Register.
However, the decision was brief, consisting of only four articles, and it was criticized from a legal standpoint for several years. This led to many legal and judicial problems and disputes due to the significant differences between the
commercial agency contract and the franchising contract, even if there were some common provisions between the two contracts. However, this legal framework may have been acceptable at that time, when franchising was not as prevalent as it is today.The Saudi government has responded to these criticisms by issuing the Saudi Franchise Law and its implementing regulations through Royal Decree