Introduction: Why Franchising in the UAE?

Franchising has become a popular business expansion model in the UAE, thanks to its dynamic economy, multicultural population, and strategic position as a gateway to the Middle East and beyond. Cities like Dubai, Ras Al Khaimah and Abu Dhabi are particularly attractive to international brands, offering strong infrastructure, investor-friendly regulations, and access to a consumer base that values global standards. Key industries for franchising include food and beverage, retail, education, healthcare, and wellness.

Is There a Franchise Law in the UAE?

Unlike other jurisdictions, the UAE does not have a dedicated franchise law. Instead, franchise agreements are governed by a mix of legal sources, most notably:

Federal Law No. 18 of 1993 (Commercial Transactions Law. as amended)
Federal Law No. 5 of 1985 (UAE Civil Code, as amended)
Federal Decree Law No. 33 of 2021 (Commercial Agencies Law), where applicable

As a result, franchising relationships are largely contractual in nature, although they are interpreted in line with overarching principles of good faith, fairness, and public order.

Commercial Agency vs. Franchising in the UAE : A Key Distinction

Not all franchise arrangements fall within the scope of the UAE’s Commercial Agencies Law. However, if a franchise provides exclusivity to a local partner and is registered with the UAE Ministry of Economy, it may be treated as a commercial agency.

This has significant legal consequences:

The local agent (franchisee) may acquire termination protection and compensation rights
The agreement may not be terminated or non-renewed unilaterally without “justifiable cause”
Disputes may be referred to the Commercial Agencies Committee

To avoid this, franchisors often avoid granting exclusivity or refrain from registering the relationship as an agency.

What Should a Franchise Agreement in the UAE Include?

Franchise agreements in the UAE should be carefully structured and adapted to local legal and commercial realities. Key elements typically include:

License scope and territorial rights
Duration of the agreement and renewal options
Initial fees and royalties, including any marketing contributions
Operational obligations such as brand standards, manuals, and inspections
Training and support offered by the franchisor
Termination rights and post-termination restrictions, including non-competes
Dispute resolution—many parties opt for arbitration or DIFC/ADGM jurisdiction

A bilingual agreement (Arabic and English) is strongly advised, especially if enforcement in UAE courts may be needed.

Registration, Trademarks, and Formalities

There is no requirement to register a franchise agreement with the authorities unless it qualifies as a commercial agency. However, registering trademarks with the UAE Ministry of Economy is crucial to protect the brand and associated IP rights.

Agreements should always be executed in accordance with UAE formalities. If they are likely to be used in UAE courts, an Arabic version or certified translation is required.

Risks and Best Practices for Franchisors and Franchisees

For Franchisors:

Franchisors must conduct comprehensive due diligence on prospective partners. They should ensure that their intellectual property is registered and protected, and that confidentiality and non-compete clauses are enforceable. Avoiding overbroad exclusivity is often a strategic move.

For Franchisees:

Franchisees should examine the realistic return on investment, the franchisor’s support obligations, and whether the agreement permits early termination or reselling. Being aware of the risks of unregistered vs. registered relationships is key to understanding their rights.

Operating Through Free Zones vs. Mainland

Franchises in the UAE can be established in either the mainland or a free zone. Each has pros and cons.

Free zones (e.g., DMCC, IFZA, Dubai South) offer 100% foreign ownership, no local sponsor requirement, and streamlined setup, but may limit business to within the zone unless a dual license is obtained.
Mainland entities can trade directly with the UAE market but often require a local service agent or sponsor for certain structures.

Choosing the right jurisdiction depends on the franchise’s business model and target customer base.

Dispute Resolution in Franchise Arrangements

Many franchise agreements in the UAE refer disputes to arbitration (DIAC, ICC, or LCIA) or to courts of the DIFC or ADGM, which offer common law frameworks and international enforceability. However, enforcement may still require coordination with onshore UAE courts, particularly if the franchise operates in the mainland. To ensure enforceability, agreements should be clearly drafted and supported by official Arabic translations.

Conclusion: Is Franchising in the UAE Worth It?

Franchising in the UAE remains an exciting and scalable model for international expansion. However, it must be approached with solid legal advice, awareness of local nuances, and clearly defined contractual protections.

Whether you’re an international brand expanding into the UAE or a local entrepreneur acquiring franchise rights, investing in proper legal structuring is essential to ensure long-term success and avoid future disputes.

How Rubert & Partners Can Help with Franchising in the UAE

At Rubert & Partners, we assist both franchisors and franchisees in:

Drafting and negotiating franchise agreements
Advising on commercial agency risks
Registering trademarks and protecting intellectual property
Structuring free zone and mainland setups
Handling franchise disputes and enforcement matters

We hope this post will help you and remain available for any questions regarding this post of general application.

📩 Get in touch with us today to schedule a consultation or visit our Commercial Law Services in UAE page to learn more.

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*The information on this page is not intended to be legal advice. This article is intended to provide an initial introduction to the key aspects of franchising in the UAE.