Saudi Arabia: An Overview of its Commercial Franchise Law

Abstract

As of 22 October 2019, the Kingdom of Saudi Arabia has published its Royal Decree No. M/22 dated 9/2/1441 (corresponding to 8 Oct 2019) for Law on Commercial Franchise System (CFL’19). If the Franchisor has made representations (or intends to make representations) to Franchisee, as to information on historical or anticipated financial performance of Franchise business owned by the Franchisor, then CFL’19 makes it mandatory for the Franchisor to include such information (on historical or anticipated financial performance) in the Disclosure Document - as required/specified under the Implementing Regulations of CFL’19. This article provides an overview of CFL’19, that aims for: (a) encouragement of franchise activities in KSA, (b) development of a legal framework to regulate relationship between Franchisor and Franchisee, (c) to afford certain protections to the Franchisee especially when a Franchise Agreement is terminated, (d) to ensure disclosure of rights, obligations and risks related to Franchise opportunities to assist prospective Franchisees in making informed investment decisions, and (e) to continuously improve the quality of goods and services offered in the Kingdom of Saudi Arabia.