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franchise agreements in the UAE are where the compass points when you mention investment. The luxurious city of Dubai holds many opportunities within its streets. Just walk around its beautiful streets and you’ll find all sorts of international brands in the form of restaurants, hotels, luxury clothes, and even convenience stores.

By virtue of Franchise agreements, an international brand selling goods or services can easily enter the UAE market and even open several branches. And with a great investment environment with outstanding info-structure and an encouraging government always updating its laws to match the market’s needs, a Franchise agreement is a great window of opportunity for investors.

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So what are Franchise agreements?

There is no legal definition for a franchise agreement because the conditions and the methods of operations vary widely depending on the type of business you are going to get a franchise for. However, the Commercial Agencies Law (Federal Law No. 18 of 1981), defines an ‘agency’ as any arrangement in which a Principal is represented by any agent ‘for the purpose of distribution, selling, display or rendering of a commodity or service in the State, against a commission or profit’. And you can legally file a franchise as a commercial agency as Many franchisees in the UAE have registered as commercial agents.

However, to better set up a franchise, a franchise agreement is drafted for that purpose. You have to be very careful when drafting a franchise agreement since it’s a legally binding document that holds in court. So it’s better to always make an esteemed law firm such as Khairallh Advocates. Basically, a franchise agreement is a law-abiding deal between a franchise and a branch drafted to organize the relationship between them for all matters regarding sales, distribution, trademark usage, and any other technical details.

What are the aspects that a franchise agreement can cover?

According to our best lawyers a franchise agreement can determine any aspects regarding daily operations, trademark and intellectual rights, and many others. Here are some aspects that it could include:

  1. The franchise agreement can determine the location of the new franchise
  2. It shows in detail how franchisees are expected to run their operations
  3.  Staff and Training
  4. the length of duration of the agreement
  5. initial franchise fee and royalties, also, the cost of using their trademarks
  6. The usage of Trademark licensing or patent
  7. The type of marketing used and the Advertising
  8. Determine Renewal rights or termination process, or even exit strategies for each party
  9. Additional details such as maintenance and upgrade or proprietary statements

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What legal documents are required to file for a franchise agreement?

A franchise agreement can be filed as a commercial agent as mentioned before. So basically it requires the same type of proper legal documentation. to register as a commercial agent, (or a franchise agreement which we have established legally is the same thing) you will need to submit an application for registration in the commercial agents’ registry. In addition, you must attach a written and notarized contract (along with an Arabic translation). also, you need supporting documents that include the name of the agent, principal, nationality, and address of each, assets, commodities, activity area of agent, and commencement and expiry date of agency and service relevant to the trade agency. Also, franchise agreements include authorization of brand use. You have to register this agreement with the Ministry of Economy. It has to be translated into Arabic along with the application form stating the terms of the relationship. Both parties need to ensure that the terms of the Agreement don’t breach the UAE Competition Law & Regulation

When do the rules of “agency” apply to a franchise agreement?

Basically, there are 3 conditions that need to be filled in order to fit the criteria of an “agency”

  1. The agent must be a UAE national or a company wholly owned by UAE nationals except for certain industries that were excluded by Federal Law No. 2 of 2010)
  2. The relationship must be exclusive between the two parties
  3. The relationship must be registered with the UAE Ministry of Economy  

What are the warnings that companies need to watch out for when starting a franchise in the UAE?

First and most important, companies need to ensure the protection of their intellectual rights. Also, companies must pay special attention to Islamic Sharia and dietary laws like halal meat and the prohibition of alcohol. They must take an interest with the regions great heritage like clothing and social habits. Also, they must restrain from trading with substances in a way that can break relevant trade barriers. All in all, the technical process is fairly transcribed in Federal Law No. 18 of 1981 on (UAE Commercial Agencies Law),  Federal Law No. 18/1993 (UAE Commercial Code), and Federal Law No. 5/1985 On the Civil Transactions Law of the United Arab Emirates.

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How to terminate a franchise agreement?

The franchise agreement law and regulations is usually registered as a commercial agency agreement.  So it can only be terminated by consent or when there is a lack of consent a court order. You could add a termination of agreement clause in the case of a breach of the franchise agreement.

In case of lack of consent to the termination, the franchisee may continue to trade. until a court order validates the termination or the parties reach a settlement. Meanwhile, the franchisor is prohibited from appointing a replacement franchisee. Sometimes a party may ask for compensation in substantial amounts to be paid in order to consent to the termination of the franchise agreement. Lastly, the court may decide not to terminate the contract, and have it deregistered as a registered commercial agency agreement if it is unfair to terminate.

In conclusion

Khairallh Advocates & Legal Consultants offers many services related to franchise agreements with many success stories thanks to our best lawyers, Our law firm plays an important role in the franchise contract process by providing legal advice and support to both the franchisor and franchisee rights.

related to franchise consulting services, they can help to ensure that the agreement is legally sound and protects the interests of both parties. A well-drafted franchise agreement can provide a solid foundation for the franchise relationship and help to minimize the risk of disputes and legal issues down the road.

For these reasons, it is highly recommended that both the franchisor and franchisee seek the assistance of a qualified and experienced franchise attorney when negotiating and drafting a franchise agreement in Dubai

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