Franchising in the United Arab Emirates (U.A.E)

Economy

The U.A.E has the 35th largest economy in the world and is rapidly expanding. Both Dubai and neighbouring Abu Dhabi have become key tourist and investment hubs as well as destinations for international franchisors.

Legislation

There is no uniform legislation governing franchise law in the U.A.E. If however, the three (3) prerequisite conditions necessary under Agency Law are satisfied, the franchise relationship will be subject to U.A.E agency law. The U.A.E Commercial Agencies Law (Federal Law No. 18 of 1981, as amended in 1988, 2006 and most recently in 2010) regulates the organisation and appointment of Commercial Agents. General contractual principals governed by Civil Transactions Law, Federal Law No. 5 of 1985 and the Commercial Transactions Law, Federal Law No. 18 of 1993, and Federal Law No. 8 of 2002 on Trademarks and the U.A.E Civil Procedure Code being Federal Law No 11 of 1992, also impact upon the regulation of franchises in the U.A.E. Various Free Trade Zone (FTZ) authorities regulate franchise agreements and relationships in Free Trade Zones within the U.A.E.

Franchise Market

The FTZ, (which are specific locations within the U.A.E) were established to encourage foreign investment. The primary benefit of establishing a branch office in a Free Trade Zone is 100% foreign ownership is permitted; 100% repatriation of capital and profits and 100% import and export tax exemptions apply.

The food and services are the most popular franchising sectors in the U.A.E franchising industry. Fast food accounts for approximately forty (40) percent of the franchise market, however fashion, education, healthcare and hospitality sectors are expanding at a fast rate.

Dubai organizes the annual Franchising Middle East Exhibition (FME) which is the largest International Franchise Show in the Middle East North Africa Region.

Franchise Legislation

• There is no specific legislation governing franchise law in the U.A.E.
• Franchisors who do not wish for their franchisees to obtain the benefit and protections of the U.A.E Commercial Agencies Laws will need to structure their relationships and documentation in a particular manner.
• There are no disclosure requirements under U.A.E laws.

Conclusion

The potential impact of U.A.E Agency laws means that franchisors looking to enter the U.A.E market will need to work closely with specialist international franchise counsel and local counsel.