TRW & Co · Corporate & Commercial
Franchising in the UAE
Franchising in the UAE has no dedicated statute, so brands must navigate the Commercial Agencies Law, the new Civil Transactions Law in force since 1 June 2026, trade mark and competition rules. This guide explains registered and unregistered structures, disclosure duties, key terms, the launch process and how to avoid the mistakes that make exits slow and expensive.
Key pointThere is no franchise disclosure law, but the 2026 civil code imposes a non-excludable duty to disclose information decisive to consent, so a franchisor's pre-contract disclosure now carries real legal weight.
At a glance
No franchise statute
Franchising draws on the Commercial Agencies Law, the civil code, IP and competition law, plus sector licensing in each emirate.
Registration changes everything
A franchise entered in the Commercial Agencies Register gains statutory protection; an unregistered one is not a valid commercial agency under Article 3.
One year's notice
Ending a registered agency needs at least one year's notice, compensation may be claimed, and disputes go first to the Commercial Agencies Committee.
Disclosure duty
Since 1 June 2026 the civil code requires good faith negotiation and disclosure of information decisive to consent, and this cannot be excluded.
Notarised trade mark licence
Under the Trademarks Decree-Law a licence must be in writing and notarised; recording it helps prove authorised use.
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What franchising in the UAE covers
Franchising in the UAE is the licensing of a brand and a business system to a local operator, who opens and runs outlets in return for fees and royalties. It ranges from a single-unit franchise to master franchise and area development agreements covering the UAE or the wider GCC. Food and beverage, retail, fitness, education, healthcare services and hospitality are the most active sectors.
There is no franchise-specific statute. Instead, franchising in the UAE draws on the commercial agencies regime, the general law of contract, intellectual property law and competition law, together with sector licensing in each emirate. The interaction between those regimes decides how easily a franchisor can choose its partner, enforce standards and exit.
Getting the structure right at the start matters more here than in many markets. A franchise that is registered as a commercial agency gives the local partner statutory protection that the franchisor cannot later contract away. For related models see our pages on commercial agencies and distribution and agency agreements.
The legal framework
The Commercial Agencies Law
Federal Law No. 3 of 2022 on Regulating Commercial Agencies defines a commercial agency as representation of a principal by an agent under a contract of agency, distribution, sale, offer or concession. Franchise arrangements are generally treated as capable of falling within that definition. Under Article 3, an agency is valid only if it is entered in the Commercial Agencies Register kept by the Ministry of Economy and Tourism; an unregistered agency is not valid as a commercial agency.
Article 2 limits commercial agency activity to UAE nationals and companies wholly owned by them, with exceptions, including for qualifying public joint stock companies and, by Cabinet decision, for an international company where the agency is new and there is no existing agent. Where the agent must build showrooms, stores or maintenance facilities, the default term is five years unless otherwise agreed (Article 6). The Ministry's commercial agency legislation page lists the implementing Cabinet decisions.
Ending a registered agency is regulated. Termination or non-renewal requires at least one year's notice, compensation may be claimed for damage caused by expiry or termination, and disputes go first to the Commercial Agencies Committee before any court action (Articles 9 to 11 and 24). The law expressly allows the parties to agree arbitration.
The new Civil Transactions Law
The Civil Transactions Law, Federal Decree-Law No. 25 of 2025, in force since 1 June 2026, governs the franchise agreement as a contract onshore. The UAE has no franchise disclosure document regime, but the new code requires negotiations to be conducted and ended in good faith and imposes a duty, which cannot be excluded, to disclose information decisive to the other party's consent. In practice this brings franchise disclosure close to a legal obligation: unit economics, litigation history and the franchisor's own performance in the region can be decisive.
Franchise agreements are usually offered on standard terms. Under Article 223, a court may modify unfair conditions in a contract concluded by adhesion, and that power cannot be excluded. Article 224 allows the court to reduce excessively onerous obligations after exceptional unforeseeable events. Franchisors should therefore explain and justify key restrictions rather than rely on boilerplate.
Intellectual property and competition law
The brand must be protected under the Trademarks Decree-Law, Federal Decree-Law No. 36 of 2021. A trade mark licence must be in writing and notarised, and may be recorded with the Ministry; recording is not a condition of validity but helps prove use and authorised licensing, and a registration can be cancelled after five consecutive years of non-use. Operations manuals are protected as copyright works and as confidential information; our page on trade secrets explains the protection.
Pricing and territorial restrictions are tested under Federal Decree-Law No. 36 of 2023 on the Regulation of Competition. Imposing minimum resale prices is high risk; recommended prices are safer if genuinely non-binding. Exclusive territories are common, but bans on passive sales and long non-competes need justification. See our competition law page.
Registered agency, unregistered franchise or direct ownership?
The central decision is whether the franchise should be registered as a commercial agency. Most international franchisors prefer not to, because registration gives the franchisee strong termination protection. Some local partners insist on it for the same reason. Since the 2021 reforms allowing full foreign ownership of many mainland companies, some brands also consider operating company-owned outlets directly.
| Option | Who may operate | Exit position | When it fits |
|---|---|---|---|
| Registered commercial agency | UAE nationals or wholly UAE-owned companies, subject to Article 2 exceptions | At least one year's notice; compensation claims; Committee referral before court | Local partner demands exclusivity and protection; long-term partnership intended |
| Unregistered franchise agreement | Determined by the franchisee's trade licence and the activity rules in the emirate | Contractual terms apply, read with the civil code's good faith and abuse-of-rights rules | Franchisor wants control and freedom to change partners |
| Master franchise with sub-franchising | Master franchisee licensed for franchising activities; sub-franchisees licensed for their outlets | Contractual, but multi-party exit needs step-in and assignment rights | Regional roll-out across emirates or the GCC |
| Company-owned outlets | Franchisor's own mainland, free zone or joint venture company | Corporate exit, subject to employment and lease obligations | Brand wants full control and has capital to invest |
An unregistered franchise is still a binding contract, but it is not a valid commercial agency, and its terms are enforced as ordinary contract terms. Commentary notes that the agency law lists expiry of a fixed-term contract as a recognised ground of termination, which improves the position compared with the 1981 law, but registered agents can still claim compensation in defined circumstances. Our article on commercial agency law explains the changes.
In the UAE, the most important franchise decision is not the royalty rate but whether the agreement will sit on the Commercial Agencies Register.
Key terms in a UAE franchise agreement
Territory, development schedule and exclusivity
Define the territory by emirate or the whole UAE, and say whether the free zones, airports, malls under separate ownership and online sales are included. Master and area development agreements should tie exclusivity to a development schedule with clear consequences for missing targets, such as loss of exclusivity before termination.
Fees and tax
Initial fees, development fees, royalties and marketing fund contributions should be defined with the calculation base, reporting and audit rights. Royalties paid to a non-resident franchisor are generally subject to VAT under the reverse charge in the hands of a registered franchisee, and the UAE does not currently levy withholding tax on them. Corporate tax and transfer pricing apply to related-party arrangements.
Standards, supply and controls
Operating standards, approved suppliers and fit-out requirements protect the brand, but tied supply and price controls raise competition questions. Keep supply obligations linked to quality, allow approved alternatives where possible and avoid fixing resale prices. Food, health and education franchises must meet emirate licensing rules; see our article on food business licensing.
Support, training and the operations manual
The franchisor's obligations are often drafted loosely, which becomes a problem once the civil code's good faith duties are in play. Specify pre-opening support, initial and ongoing training, site selection assistance, technology systems and the format and update process for the operations manual. A franchisee that can point to vague promises of support will argue that poor performance is the franchisor's fault.
The manual should be incorporated by reference, with a right to update it for brand, safety and legal reasons, and a limit on changes that impose significant new investment during the term. Under Article 223, standard terms that let one party change obligations at will are the kind of provision a court may review, so tie variation rights to objective criteria and reasonable notice.
Marketing funds and digital channels
Marketing fund contributions are a frequent source of conflict in franchising in the UAE. State how the fund is held, what it may be spent on, whether regional campaigns benefit the UAE network, and what reporting the franchisee receives. Where the franchisor also takes rebates from approved suppliers, disclose that practice.
Delivery platforms, social media accounts, domain names and customer data need express allocation. The franchisor should own brand accounts and domains and license their use; customer data processed by the franchisee should be handled under a data sharing or processing agreement that complies with the federal PDPL or, where relevant, the DIFC or ADGM regime. On termination, these channels must transfer back quickly, or the brand loses its customers along with the outlet.
Term, renewal, termination and post-term restrictions
Set a fixed term with renewal conditions based on objective performance. Define material breaches, cure periods and immediate termination events. Post-term non-competes should be limited in time and area. Include de-identification, return of manuals and step-in or purchase options over outlets, and coordinate with the leases, which often belong to the franchisee.
Launching a franchise in the UAE: step by step
- Protect the brand. File or verify UAE trade mark registrations in the classes the franchise will use, and check that no local party has registered a similar mark.
- Select and vet the partner. Check ownership, financial capacity, existing brand portfolios, sanctions exposure and the partner's ability to obtain the necessary licences.
- Decide the structure. Choose between a registered agency, an unregistered franchise, a master franchise or direct ownership, and record the reasons.
- Disclose and negotiate. Provide a disclosure pack covering economics, obligations and risks, and negotiate in good faith; keep a record of what was disclosed.
- Sign and record. Execute the franchise agreement and a separate notarised trade mark licence; record the licence where useful, and register the agency only if that is the agreed structure.
- Open and supervise. Support licensing, fit-out and training; then audit standards, royalty reporting and marketing fund use regularly.
- Plan renewal or exit. Review performance well before expiry and give notice in good time; for registered agencies allow at least one year.
Documents to assemble
- UAE trade mark certificates and any pending applications or oppositions.
- Franchise disclosure pack: financial performance information, fees, investment estimates, litigation history and key obligations.
- Franchise or master franchise agreement, development schedule and fee schedule.
- Notarised trade mark licence, with an Arabic translation where it will be filed or relied on onshore.
- Operations manual and brand standards, marked confidential.
- Approved supplier list and supply agreements.
- Franchisee's trade licence, ownership documents and sector permits.
- Lease, fit-out and step-in documents for each outlet.
Keep the trade mark licence separate from the commercial franchise agreement. A short notarised licence is easier to file and record, avoids disclosing commercial terms to the authorities and can be terminated cleanly alongside the franchise agreement.
Risks and common mistakes in franchising in the UAE
Registering the franchise without meaning to
Some franchisees ask for a registered agency as a condition of signing, or seek registration afterwards using signed and notarised documents. Once registered, the franchisor faces statutory notice and compensation rules and referral of disputes to the Commercial Agencies Committee. Decide the structure at the outset, say expressly whether the agreement is intended to be registered, and control the creation of notarised originals that could support an application.
Treating disclosure as optional
The UAE has no franchise disclosure statute, but the new civil code imposes a non-excludable duty to disclose information decisive to consent and requires good faith in negotiations. A franchisee that invested on the basis of optimistic projections, or without being told about failed outlets, may have a claim. Provide a structured disclosure pack, keep a record and avoid unqualified earnings claims.
Weak trade mark position
Franchisors sometimes launch before their marks are registered in the UAE or in the right classes, or allow the local partner to file. That creates leverage for the franchisee in any dispute and can delay customs and enforcement action. Register first, in the franchisor's name, and see our trade mark strategy page.
Price-fixing and supply ties
Global franchise templates often include fixed pricing, mandatory suppliers and absolute territorial bans. Under the UAE competition regime, resale price maintenance and restrictions on passive sales carry real risk. Review templates for the UAE, frame prices as recommendations and justify supply obligations by reference to quality.
Ignoring sub-franchise and lease chains
In master franchise structures, the franchisor often has no direct contract with sub-franchisees or landlords. If the master franchisee fails, the franchisor may lose control of the network. Build in step-in rights, direct agreements or collateral warranties with sub-franchisees, landlord consents to assignment and a right to buy outlets on termination.
Free zones, the financial centres and the cross-border angle
Free zone companies can hold franchise rights, but most consumer-facing franchises trade in the mainland and need a mainland licence for each outlet. The DIFC and ADGM have no separate franchise legislation; a franchise agreement governed by DIFC or ADGM law is interpreted under their common law frameworks, but trade mark, agency and onshore licensing rules still apply to outlets in the emirates. Our page on mainland company structures covers set-up.
Brands from the United Kingdom, the United States, Europe and Asia commonly appoint a UAE master franchisee with rights extending to Saudi Arabia and other GCC states. Each state has its own franchise or agency rules, and Saudi Arabia has a dedicated franchise law with disclosure requirements, so a GCC-wide agreement needs local addenda. Bangladeshi, Indian and Singaporean food and education brands entering the UAE face the same structuring choices, with additional attention to halal and education licensing.
For enforcement, arbitration seated in the DIFC, ADGM, London or Singapore is common for franchise agreements, subject to the Commercial Agencies Committee's role for registered agencies. Franchisors should also plan for interim relief to stop unauthorised use of the brand after termination, which may require action before onshore courts.
Currency and payment mechanics also deserve attention. Royalties are usually invoiced in US dollars or dirhams; the agreement should fix the exchange rate source, the payment date, late payment consequences and the franchisor's right to audit gross sales. Where a franchisor receives fees through a regional holding company, the flow should be checked for corporate tax, VAT and transfer pricing consistency before the first outlet opens.
How TRW & Co helps
Market-entry structuring
We compare registered agency, unregistered franchise, master franchise and direct ownership models against control, tax and exit cost, and recommend the structure that fits the brand.
Agreement drafting and localisation
We draft and localise franchise, master franchise and development agreements for the UAE and the GCC, reflecting the 2026 civil code, the agency law and competition law.
Brand and know-how protection
We coordinate trade mark filings, notarised licences, confidentiality regimes and customs recordals with our IP colleagues.
Disputes and exits
We advise on termination, non-renewal and Commercial Agencies Committee proceedings and, where court representation is required, work alongside locally licensed advocates and registered practitioners.
To discuss franchising in the UAE, contact us through our contact page, email info@trw.co or call +971 58 942 1012. See also our franchising article, our hospitality and leisure practice and all our practices.
Checklist for decision-makers
- Are our UAE trade marks registered, in our name and in the right classes?
- Have we decided, and recorded, whether the franchise will be registered as a commercial agency?
- Does the partner meet ownership and licensing requirements for the chosen structure?
- Have we given structured disclosure that would satisfy the civil code's good faith and disclosure duties?
- Have pricing, supply and territorial restrictions been reviewed under UAE competition law?
- Is the trade mark licence separate, notarised and ready to record?
- Are development targets, fees and audit rights clear and enforceable?
- Do step-in, assignment and lease provisions protect the network if the partner fails?
- Have we planned notice periods and exit steps well before expiry?
- Is our template for franchising in the UAE aligned with GCC addenda for regional roll-out?
Frequently asked questions
01Is there a franchise law in the UAE?
There is no franchise-specific statute. Franchising in the UAE is governed by the Commercial Agencies Law (Federal Law No. 3 of 2022), whose definition of commercial agency includes concession arrangements, together with the Civil Transactions Law in force since 1 June 2026, the Trademarks Decree-Law, copyright and trade secrets law, competition law and sector licensing rules. Whether the commercial agencies regime applies in full depends largely on whether the franchise is entered in the Commercial Agencies Register.
02Does a franchise agreement have to be registered with the Ministry?
Registration is not required for the franchise agreement to be a binding contract. It is required for the arrangement to be a valid commercial agency with the statutory protections that follow. Many franchisors deliberately leave franchises unregistered to keep contractual control over termination. Some franchisees ask for registration. Both parties should agree the position in writing, and the franchisor should be careful about notarised documents that could support a registration application.
03Can a foreign-owned company be a franchisee in the UAE?
For a registered commercial agency, Article 2 limits the activity to UAE nationals and companies wholly owned by them, with exceptions for qualifying public joint stock companies and, by Cabinet decision, certain international companies where the agency is new. For an unregistered franchise, the position depends on the franchisee's licensed activity and the rules of the licensing authority in the relevant emirate. Many activities now allow full foreign ownership onshore, but check the specific activity before signing.
04How much notice is needed to end a registered franchise?
Under the Commercial Agencies Law, termination or non-renewal of a registered agency requires notice of at least one year before the date set for termination, subject to the law's conditions. The agent may object to the Commercial Agencies Committee, and the contract stays in force until the later of the end of the notice period and the Committee's decision. The agent may also claim compensation for damage caused by expiry or termination in the circumstances the law describes.
05Do franchisors have to give pre-contract disclosure?
There is no prescribed disclosure document in the UAE. However, the Civil Transactions Law in force from 1 June 2026 requires good faith in negotiations and imposes a duty, which cannot be excluded, to disclose information decisive to the other party's consent. A franchisor that withholds material information, such as poor results from existing outlets, risks claims. A structured disclosure pack with a signed acknowledgment is the sensible approach.
06Can a franchisor set the prices franchisees charge?
This is risky. Under Federal Decree-Law No. 36 of 2023 on the Regulation of Competition, imposing minimum resale prices is treated as a serious restriction. Recommended prices are generally safer if they are genuinely non-binding and not enforced through penalties or incentives. A short, coordinated low-price campaign to launch a new product may be justifiable in some cases. Review global templates before using them in the UAE and take advice on any pricing control.
07Which law should govern a UAE franchise agreement?
International franchisors often choose English, DIFC or ADGM law with arbitration, which gives predictable interpretation and portable awards. For a registered agency, disputes must first go to the Commercial Agencies Committee, though the law permits arbitration agreements. Mandatory UAE rules on agency, trade marks, competition and, for onshore matters, certain civil code provisions may apply regardless of the chosen law. The trade mark licence is usually kept under UAE law for filing purposes.
Sources and official materials
- Federal Law No. 3 of 2022 on Regulating Commercial Agencies — Definition, registration, term, termination and disputes
- Commercial Agency Legislations, Ministry of Economy and Tourism — Agency law and implementing Cabinet decisions
- Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law — Good faith, disclosure and adhesion rules from 1 June 2026
- Federal Decree-Law No. 36 of 2021 on Trademarks — Trade mark registration and licensing
- Federal Decree-Law No. 36 of 2023 Regarding Regulating Competition — Resale price and territorial restrictions
- Intellectual Property Legislations, Ministry of Economy and Tourism — IP laws relevant to brands and manuals
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
