If you are a franchisee, let us outline the obligations you have towards the franchisor and the general franchise business model.

Here are those obligations:

– Obtain the franchisor’s approval for any changes in goods or services or the way franchise business is conducted.
– Allow the franchisor or their representatives to inspect the facilities used in the franchise business, provided that this does not disrupt the franchisee’s business or cause harm.
– Provide the franchisor with data related to the franchise business that enables the franchisor to develop the franchise business model, including financial and accounting data related to those operations.
– Obtain the franchisor’s approval when changing the location of the franchise business.
Guidance: Franchisee/Franchisor

 

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What are the conditions for granting a franchise in the Kingdom of Saudi Arabia?

A franchise opportunity may not be offered or granted unless the franchise business has been practiced according to the franchise business model for at least one year by two persons or in at least two different outlets. One of these persons may be the franchisor or any person within their group.

Furthermore, if the franchisor does not personally practice the franchise business in the Kingdom, a franchisee with the right to grant sub-franchises may not offer a franchise opportunity or grant a franchise unless they or other franchisees have practiced the franchise business in the Kingdom for at least one year.

Guidance: Prospective Franchisor

 

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If the franchisee is a natural person, the franchise agreement terminates upon the initiation of any liquidation procedures under the Bankruptcy Law, death, loss of capacity, or the emergence of a health impediment that prevents the ability to conduct the franchise business. The agreement may include a provision allowing its transfer in cases of death, loss of capacity, or the emergence of a health impediment to the franchisee’s heirs or another person unless the franchise agreement states otherwise.

Guidance: Franchisee/Franchisor

 

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The franchise agreement must include any fees the franchisee is required to pay to the franchisor, including initial franchise fees, fees for training the franchisee’s employees, technical support, and the method for calculating any amounts payable for goods or services provided to the franchisee by the franchisor or any other person within their group.

Guidance: Franchisor

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The disclosure document includes reports detailing various information about the franchising company and its brand. The franchisor prepares the disclosure document and then provides it to the franchisee before the final franchise agreement is signed.

Guidance: Franchisor/Franchisee

 

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Any agreement under which the franchisee waives or relinquishes any of their rights stipulated in the Franchise Law is void, unless this agreement is part of a final settlement agreed upon with the franchisor or authorized by law.

Guidance: Franchisee