{"id":2590,"date":"2026-02-23T11:11:20","date_gmt":"2026-02-23T11:11:20","guid":{"rendered":"https:\/\/alrashidi.law\/?p=2590"},"modified":"2026-03-24T13:01:04","modified_gmt":"2026-03-24T13:01:04","slug":"multi-unit-commercial-franchise","status":"publish","type":"post","link":"https:\/\/alrashidi.law\/en\/multi-unit-commercial-franchise\/","title":{"rendered":"Multi-Unit Commercial Franchise"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Kingdom of Saudi Arabia seeks to become a global force in investment by stimulating the Saudi economy, diversifying sources of income, and supporting the business environment in the Kingdom (1). Commercial franchise agreements (franchising) are among the most important tools of commercial expansion, as they enable companies to transfer their successful business model to other entities in return for fees or a percentage of profits. The Saudi Franchise Law was issued by Royal Decree No. M\/22 dated 9\/2\/1441H to regulate franchising activities in the Kingdom.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A franchise agreement is a contractual regime in commercial relations under which a person known as the franchisor grants to another person known as the franchisee the right to carry on the business, the franchised business, for its own account, in association with the trademark or trade name owned by the franchisor or licensed to it for use, including the provision to the franchisee of technical expertise and know-how and the determination of how the franchisee is to operate the franchised business, in consideration of a financial or non-financial consideration, excluding amounts paid by the franchisee to the franchisor in return for goods or services (2).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This definition includes single-unit franchise agreements, under which the franchisee is granted the right to operate and exploit the trademark for only one branch or unit. It also includes those agreements relating to multiple units, under which the franchisee is granted the right to exploit several branches or units together within a specified geographic area or within a particular country.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Controls Governing Multi-Unit Franchise Agreements (Master):<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The Saudi regulator did not differentiate between the controls applicable to granting a franchise for a single unit and those applicable to a multi-unit franchise. The Franchise Law set out several conditions and controls that must be complied with in franchise agreements concluded in the Kingdom generally, namely:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1- The franchise agreement must be in writing in the Arabic language and signed by both parties; if it is drafted in a language other than Arabic, it must be translated into Arabic by an accredited translation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2- The franchise agreement must include, in addition to what is agreed between its parties, the following:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A- The franchised business and its description, the term of the franchise agreement, the method of its amendment, and its geographic scope.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">B- Any consideration that the franchisee must pay to the franchisor, including the franchise fee, the consideration for training the franchisee\u2019s employees (if any), technical support, and the mechanism for calculating any amount paid as consideration for goods or services provided to the franchisee by the franchisor or any person within its group.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">C- The obligations of both parties regarding the franchisor\u2019s training of the franchisee\u2019s employees.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">D- The franchisor\u2019s obligation to provide technical and marketing expertise and any other expertise required by the nature of the granted franchise.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">E- The franchisee\u2019s obligation to comply with the instructions, the method of marketing and presentation, and to preserve the identity of the franchise.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">F- Any obligation of the franchisor relating to the supply of any goods or services to the franchisee, and the franchisee\u2019s obligation regarding obtaining such goods or services directly from the franchisor or through a third party pursuant to the franchisor\u2019s instructions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">G- The franchisee\u2019s rights to use any trademark and any other intellectual property rights relating to the franchised business, and the obligations of both parties in the event of infringement of intellectual property rights, and the compensation arising therefrom.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">H- The mechanism for settlement of any dispute relating to the franchise agreement.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">I- The extent to which the franchisee is entitled to grant a sub-franchise to others, and the provisions governing that.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">J- The effects arising from any change in the ownership of the franchisee or the franchisor, or the controlling person of either of them.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">K- Any other provision determined by the Implementing Regulation. (3)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The regulator also required the registration of the franchise agreement and disclosure thereof through a disclosure document (4), being a document that includes disclosure of the principal rights, obligations, and material risks relating to franchise opportunities (5). This is to be filed with the Ministry of Commerce and Investment.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Obligations of the Franchisor and the Franchisee.<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The Saudi regulator did not differentiate, as to the obligations imposed, between franchisors and franchisees in single-unit franchises and those in multi-unit franchises, notwithstanding the difference in the nature of the parties in the two types. In a multi-unit franchise agreement, franchisees are typically investors with the financial capacity and experience that enable them to expand their use of the trademark and generate profits from sub-franchise fees, and in some cases to develop the trademark itself.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The regulator provided that the franchisor must\u2014unless otherwise agreed in writing with the franchisee\u2014comply with the following:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1- To specify the rights granted to the franchisee in respect of the franchise.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2- To specify the franchise business model in detail, including stating the standards and issuing the instructions with which the franchisee must comply when carrying on the franchised business, in a manner that enables it to operate such business, and to provide it with operating manuals.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">3- To train the franchisee\u2019s employees.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">4- To provide technical and marketing expertise and other expertise required by the nature of the granted franchise.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">5- To supply the franchisee\u2014either directly or through another party\u2014with the goods or services specific to the franchise throughout the term of the franchise agreement, except for goods and services that the franchisee is left to purchase from third parties.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">6- To maintain the confidentiality of information and accounting and financial data relating to the franchisee\u2019s business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">7- To respond to the franchisee\u2019s request to provide it with details of the financial consideration payable by it or paid by it in relation to carrying on the franchised business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">8- Not to establish any facility carrying on an activity similar to the franchisee\u2019s activity within the geographic area specified in the franchise agreement, nor to grant others the right to do so, during the term of the agreement (6).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The franchisee must also, unless otherwise agreed in writing with the franchisor, comply with the following:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1- To obtain the franchisor\u2019s approval upon any change in goods or services or the method of carrying on the franchised business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2- To provide the franchisor with data relating to the franchised business that enables it to develop the franchise business model, including the financial and accounting data relating to such business.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">3- To enable the franchisor or its representatives to inspect the facilities used in carrying on the franchised business, provided that this does not result in disruption of the franchisee\u2019s business or cause harm to it.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">4- To obtain the franchisor\u2019s approval when changing the location of carrying on the franchised business (7).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, the Saudi regulator set out specific obligations regarding the information that must be included in the disclosure document where the franchisor is a master franchisee (or a multi-unit franchisee), in which case the following information about the master franchisor must be included: its trade name, its address and contact details, and its relationship with the master franchisee. A statement must also be provided regarding the franchised business it has carried on during the last five years.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">In addition, certain information must be stated regarding the agreement concluded between the franchisor and the master franchisee:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">1- A statement of the geographic scope of the agreement and the rights and obligations of each party, and the right to grant a sub-franchise.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2- The expiry date of the agreement, with clarification as to whether it is renewable or not.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">3- Cases of termination of the agreement.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">4- The extent to which the prospective agreement to be concluded would be affected in the event of termination of the master franchise agreement. (8)<\/span><\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><b>Sources:<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">(1) The Executive Summary of the Updated Investment Law for 1446H corresponding to 2024G, published on the official website of the Saudi Ministry of Investment.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(2) Paragraph Five of Article One of the Franchise Law issued by Royal Decree No. M\/22 dated 9\/2\/1441H.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(3) Article (11) of the Franchise Law.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(4) Article (6) of the Franchise Law.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(5) Paragraph Twelve of Article One of the Franchise Law.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(6) Article (8) of the Franchise Law.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(7) Article (9) of the Franchise Law.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">(8) Article (5) of the Annex (Disclosure Document Requirements) to the Implementing Regulation of the Franchise Law issued by Minister of Commerce Decision No. (00591) dated 18\/9\/1441H.<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Kingdom of Saudi Arabia seeks to become a global force in investment by stimulating the Saudi economy, diversifying sources of income, and supporting the business environment in the Kingdom (1). Commercial franchise agreements (franchising) are among the most important tools of commercial expansion, as they enable companies to transfer their successful business model to [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":601,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"disabled","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[30],"tags":[],"class_list":["post-2590","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-law-and-corporate-governance"],"acf":[],"_links":{"self":[{"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/posts\/2590","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/comments?post=2590"}],"version-history":[{"count":1,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/posts\/2590\/revisions"}],"predecessor-version":[{"id":4589,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/posts\/2590\/revisions\/4589"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/media\/601"}],"wp:attachment":[{"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/media?parent=2590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/categories?post=2590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/alrashidi.law\/en\/wp-json\/wp\/v2\/tags?post=2590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}