Below is a practical, Dubai-specific checklist of the key clauses you should include in a franchise agreement for a franchise sale in Dubai (UAE)—plus the “why” behind each clause and the common pitfalls foreign franchisors run into.
Important note (not legal advice): The UAE does not have a single, standalone “franchise law” like some countries; franchises are generally governed by the UAE Civil Code / Commercial Code, and in some cases the Commercial Agencies Law may become relevant depending on how the relationship is structured/registered.
You should have UAE counsel review your agreement, especially for agency risk, termination, and dispute resolution.
1) The “Must-Have” Clauses for a Dubai Franchise Agreement (with Dubai/UAE legal realities in mind)
1) Parties, Definitions, and Business Structure
What to include
- Full legal names, trade license numbers, and addresses
- Whether the franchisee is a mainland UAE entity, Free Zone entity, or DIFC entity
- Whether the arrangement is single unit, multi-unit, or master franchise
Why it matters in Dubai
Entity type affects licensing, employment, VAT, and dispute venue choices. It also affects whether you can select DIFC courts or arbitration cleanly.
2) Grant of Franchise & Scope of Rights (including “No Agency” language)
What to include
- Clear license to use the trademark(s), know-how, and system
- Clarify that the franchisee is an independent contractor
- Explicitly state the franchisee is not an agent, partner, or legal representative of the franchisor
- Prohibit the franchisee from binding the franchisor
Why it matters
The UAE Commercial Agencies Law can sometimes apply broadly to distribution/franchise-like relationships if structured/registered like an agency, and termination can become complicated if the arrangement falls under agency protection. So the contract should clearly describe a franchise license relationship, not an agency.
Practical tip: You also want a clause that the franchisee must not register the relationship as a commercial agency without your written consent.
3) Territory Definition + Exclusivity (and e-commerce / delivery rights)
What to include
- Exact territorial boundaries (e.g., emirate zones, city districts, trade areas)
- Whether it’s exclusive or nonexclusive
- Reservations of rights for:
- franchisor corporate sales
- third-party delivery aggregators
- e-commerce
- airports, malls, hospitals, etc.
- “Encroachment” rules (what happens if you open nearby)
Why it matters
Dubai is a dense, high-mobility market. Territorial fights are common without clear definitions, especially with delivery platforms.
4) Term, Renewal, and Conditions
What to include
- Initial term (often 5–10 years)
- Renewal options
- Renewal conditions: remodel, fees, signing updated agreement, performance compliance
- Nonrenewal rights
Why it matters
Long-term franchising depends on renewal mechanics. UAE courts will look closely at whether renewal and termination terms are clear and fair.
5) Fees: Franchise Fee, Royalty, Marketing Fund, Technology Fees, Training Fees
What to include
- One-time franchise fee
- Continuing royalties (percentage or fixed)
- Marketing/advertising fund contribution
- Local marketing spend requirement
- Technology/software fees
- Payment timing, currency, and late penalties
Why it matters
These are often the first source of disputes. The UAE generally allows commercial freedom of contract, so being explicit prevents enforcement issues later.
6) Payment Mechanics & Currency Controls (Cross-Border Transfers)
What to include
- Payment currency (AED or USD)
- Bank transfer instructions
- Responsibility for bank charges
- Withholding taxes (if any) and gross-up clause (where applicable)
- Audit rights for underpayment
Why it matters
Franchisors often receive royalties cross-border. Your agreement should anticipate bank requirements and any tax/VAT documentation obligations.
7) Operations Standards & Brand Compliance
What to include
- Mandatory adherence to manuals/standards
- Quality control and inspection rights
- Required equipment and suppliers
- Product and service standards
- Brand image, uniforms, design, signage standards
Why it matters
UAE markets are high-expectation. Brand control is essential—and it also supports trademark enforcement and licensing legitimacy.
8) Training, Opening Support, and Ongoing Support
What to include
- Initial training obligations (where, how long, who attends)
- Pre-opening obligations and timeline
- Opening assistance
- Ongoing training, audits, and required meetings
Why it matters
Many Dubai franchise disputes stem from mismatched expectations about “support.” The agreement should outline concrete deliverables.
9) Site Selection, Lease Approval, and Buildout Requirements
What to include
- Site approval procedure
- Required demographics and location characteristics
- Buildout specs and approvals
- Timelines to open (and default if delayed)
- Who holds the lease (franchisee typically)
Dubai-specific nuance
Dubai leasing is expensive and approvals can delay openings. You want deadlines and what happens if a site becomes unviable.
10) Local Licensing & Regulatory Compliance (Dubai Municipality + Permits)
What to include
- Franchisee responsibility for trade license, approvals, permits
- Compliance with food safety rules (if applicable)
- Health & safety requirements
- Employment law compliance
- VAT compliance obligations
Why it matters
Many businesses underestimate the operational licensing layer in Dubai. You need a “franchisee bears compliance responsibility” clause to reduce franchisor exposure.
11) Intellectual Property License + Trademark Protection + Recordal
What to include
- License to use trademarks, logos, trade dress, recipes, manuals
- Mandatory brand usage guidelines
- Anti-infringement obligations
- Who owns improvements / new IP created locally
- Post-termination IP stop-use obligations
UAE-specific point
Trademark licenses can be recorded with the UAE Trademark Office and many parties choose recordal as part of a franchise structure.
Your franchise agreement should authorize recordal and require cooperation.
Practical tip: Also include quality control language—many licensing frameworks globally (including common UAE practice) treat quality control as essential to maintaining valid licensing arrangements.
12) Confidentiality and Know-How Protection
What to include
- What constitutes confidential information
- Use restrictions
- Term of confidentiality post-termination
- Injunctive relief language
Why it matters
In franchising, your system and operational know-how are the product. This is critical in any UAE franchise agreement.
13) Non-Compete and Non-Solicitation
What to include
- Non-compete during term and for a reasonable period after termination
- Geographic scope tailored to Dubai/UAE
- Non-solicitation of employees and customers
- Exceptions (if required by local enforceability norms)
Why it matters
Enforceability depends on reasonableness. Dubai/UAE courts typically favor clear, proportionate restrictions.
14) Financial Reporting, POS, Data Access, and Audit Rights
What to include
- Required POS system
- Monthly reporting format
- Right to audit sales (and cost shifting if underreporting is found)
- Required bookkeeping standards
Why it matters
Royalties are tied to sales reporting. Audit rights are a franchise necessity in any market.
15) Local Advertising / Brand Fund / Digital Marketing + Arabic Language Standards
What to include
- Who controls advertising creative
- Mandatory brand approvals
- Social media restrictions
- Language and cultural compliance guidelines
- Clear rules about influencer marketing
Why it matters
Dubai’s marketing environment is highly regulated and culturally specific; you want compliance-focused language and brand approval rights.
16) Employment + Immigration Responsibilities (Visa Sponsorship, Labor Compliance)
What to include
- Franchisee responsible for all hiring and visa sponsorship
- Compliance with UAE labor law
- Indemnity for employment claims
Why it matters
Foreign franchisors are often surprised by the complexity of employment/visa sponsorship. Make responsibility explicit.
17) Insurance Requirements
What to include
- Minimum insurance types and limits
- Requirement to list franchisor as additional insured where possible
- Proof of insurance deadlines
18) Transfer, Sale of Business, and Franchisor Approval
What to include
- Franchisor consent for any transfer
- Buyer qualification requirements
- transfer fee
- training fees
- right of first refusal (optional)
- obligation to sign current agreement
Why it matters
Dubai has an active resale market. Transfer controls protect brand integrity.
19) Default, Termination, and Cure Periods
What to include
- Clear events of default (nonpayment, brand breach, illegal acts, abandonment)
- Cure periods (immediate termination for severe breaches)
- Post-termination obligations (de-identification, return manuals, IP stop-use)
UAE-specific caution
If the relationship is structured or registered as a commercial agency, termination may become harder and compensation claims can arise—another reason to avoid agency characterization and registrations unless intentional.
20) Dispute Resolution: UAE Courts vs DIFC Courts vs Arbitration
This is one of the most important Dubai-specific clauses.
Your main options:
A) Dubai Courts / UAE Law
- Standard for mainland companies; Arabic proceedings; local court process.
B) DIFC Courts “opt-in” clause
- Many international parties choose DIFC Courts because proceedings are in English and common law style. The DIFC Courts publish standard opt-in clause language for contracts.
C) Arbitration (DIAC, ICC, etc.)
- Often preferred in international franchising for enforceability and confidentiality.
Key drafting requirement
Your governing law and forum clause must be internally consistent and clearly worded, or it can become unenforceable or cause parallel proceedings.
Special caution
Older “DIFC-LCIA” arbitration clauses created confusion after the DIFC-LCIA was abolished and replaced by DIAC (Dubai Decree No. 34 of 2021). Some clauses remain enforceable in some courts, but many lawyers recommend updating dispute clauses rather than using outdated references.
21) Compliance with Anti-Bribery, Sanctions, and Ethics
What to include
- Compliance with anti-bribery laws
- Sanctions/export compliance
- ethical conduct policies
Why it matters
International franchisors need this for global compliance and banking.
22) Indemnification and Limitation of Liability
What to include
- Franchisee indemnity for local operations
- Limits on franchisor liability (to the extent enforceable)
- Force majeure
- No consequential damages (where appropriate)
23) Manual Incorporation / Ability to Update System Standards
What to include
- Manuals are incorporated by reference
- Franchisor can update standards
- Franchisee must comply with updates within a reasonable timeframe
Why it matters
You must be able to evolve the system without renegotiating the agreement.
24) Language Clause
What to include
- State which version controls (English vs Arabic)
- If you have both versions, define precedence
Why it matters
Dubai courts may require Arabic documents in litigation. Having an agreed “controlling language” helps reduce disputes.
2) Dubai / UAE “Special Risk Clauses” You Should Add (High Priority)
These are clauses that aren’t always emphasized in U.S. franchise agreements but are extremely important in Dubai:
✅ Commercial Agency Law avoidance clause
- Franchisee may not register the agreement as a commercial agency without franchisor consent
- Agreement is a trademark/business format license, not agency
- No authority to bind franchisor
This is recommended because the UAE Commercial Agencies Law can potentially apply broadly to arrangements beyond classic agency in some cases.
✅ Trademark license recordal cooperation
- Parties cooperate to record the trademark license if needed
- Franchisee must maintain quality control compliance
Trademark license recordal is commonly used in UAE franchising and is recognized in franchise law guidance.
✅ DIFC/DIAC dispute clause accuracy
- Use an updated arbitration institution clause (e.g., DIAC)
- Or correctly opt in to DIFC Courts using published language
3) A “Minimum Clause List” (If you want the quick checklist)
If you only want the “must include” list for a Dubai franchise agreement, here it is:
- Grant of franchise + no agency / independent contractor
- Territory + e-commerce/delivery rights
- Term + renewal + exit rules
- All fees (franchise, royalties, marketing, tech) + payment mechanics
- Operating standards + manuals + brand compliance
- Training + opening support + franchisor obligations
- Site selection + lease approvals + buildout requirements
- Local licensing + regulatory compliance responsibilities
- IP license + trademark recordal cooperation + quality control
- Confidentiality + non-compete + non-solicit
- Reporting + POS + audit rights
- Transfer/assignment + franchisor approval + transfer fees
- Default + termination + cure + post-termination obligations
- Dispute resolution (DIFC / DIAC / UAE courts) + governing law consistency
- Indemnities + insurance + limitation of liability
4) Final Practical Advice (so the agreement actually works in Dubai)
1) Decide early: Mainland vs Free Zone vs DIFC
This choice affects licensing, dispute resolution, and practical enforceability.
2) Manage “agency risk” intentionally
Avoid accidentally creating an agency relationship unless you want those protections/constraints.
3) Get trademarks filed/registered in the UAE
Your franchise agreement is only as strong as your ability to enforce the mark locally. The UAE Ministry of Economy is the competent authority for trademark registration.
4) Make dispute resolution modern and enforceable
Avoid outdated DIFC-LCIA language; consider DIAC, ICC, or DIFC Courts opt-in if appropriate.
For more information on how to franchise your business in Dubai and the United Arab Emirates, contact Franchise Marketing Systems: www.FMSFranchise.com
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