How franchising is regulated in Saudi Arabia
Saudi Arabia has a dedicated Franchise Law, issued by Royal Decree in 2019 and in force since 2020, together with Implementing Regulations issued by the Ministry of Commerce (MC). Before that, franchises were largely handled under the commercial agencies regime. The law now sets the core obligations of franchisors and franchisees: what must be disclosed before signing, what the agreement must cover, how it is registered, and what happens on renewal or termination.
A Franchise Center operating within Monsha'at, the SME authority, works alongside the Ministry on registration support, awareness and amicable dispute resolution. Platforms and procedures have changed since the law took effect, so the current route should always be confirmed before filing. If you are appointing a distributor rather than licensing a business model, see commercial agency registration instead.
Protect the brand first: trademark registration with SAIP
A franchise is built on a brand, and in Saudi Arabia trademarks are registered with the Saudi Authority for Intellectual Property (SAIP). Registration should come before you disclose or sign anything, because your franchisee, landlords and the authorities will all expect the brand to be protected locally.
- File in every class you actually use: restaurant and café services, food and beverage products, cosmetics, beauty services or retail, depending on the concept
- Decide early on an Arabic version or transliteration of the brand name, and register it if you will use it on signage and menus
- Search for conflicting marks before you commit to store design and packaging
- Register logos, slogans and key product names separately where they matter commercially
Disclosure document and registration with the Ministry of Commerce
The Franchise Law requires the franchisor to give the prospective franchisee a disclosure document at least 14 days before the agreement is signed or before any payment is made, whichever comes first. The disclosure document and the franchise agreement must then be registered with the Ministry within the period set by the Implementing Regulations. Documents are expected in Arabic; where the originals are in another language, a certified Arabic translation is generally required.
A disclosure document typically covers:
- The franchisor's identity, ownership, management and franchising experience
- The trademarks and other intellectual property being licensed
- Initial fees, royalties, marketing contributions and other payments
- Training, support and supply obligations, including approved suppliers
- Territory, exclusivity, term, renewal and termination conditions
- A copy of the proposed franchise agreement
The law also sets track-record conditions, for example on how long a concept or a master franchisee must have operated before further franchising. We check how these conditions apply to your brand and to the partner you choose.
Master franchise, area development or unit franchising
Most foreign brands enter Saudi Arabia through one of a few structures. The right choice depends on how much control you want, how fast you want to grow and how much capital your partner can commit.
- Master franchise: one Saudi company receives rights for the whole Kingdom or a large region and may sub-franchise to others, subject to the conditions of the law
- Area development: the partner commits to opening a set number of outlets on a schedule in a defined territory, without sub-franchising
- Unit franchise: individual outlets licensed one by one, simpler to start but harder to manage from abroad
- Own entity or joint venture: a company licensed through MISA that runs outlets itself or acts as the master franchisee; see investing in Saudi Arabia
When choosing a master franchisee, look at access to sites in malls and high streets, experience running restaurants, cafés, salons or shops, financial capacity for the development schedule, an operations and training team, and a genuine fit with your brand culture. Due diligence on the commercial registration, shareholders and existing brand portfolio is time well spent.
Opening outlets: municipal, safety and SFDA requirements
Each outlet is licensed in the franchisee's name. Requirements depend on the activity and the city, but typically include:
- Commercial registration with the Ministry of Commerce covering the right activity
- A municipal licence through Balady, the platform of the Ministry of Municipal and Rural Affairs and Housing, with signage and fit-out approvals
- Civil defence safety requirements for the premises
- Health certificates for food handlers and for staff in beauty services, as required by the municipality
- For food brands, SFDA requirements on imported ingredients and packaged food, halal evidence for relevant products, and menu information such as calorie labelling where required
- For beauty brands, SFDA notification of cosmetic products sold or used in salons
See SFDA food registration, halal certification and SFDA cosmetics.
Saudization in retail and food service
Retail and food service are among the sectors where the Ministry of Human Resources (HRSD) applies Saudization through Nitaqat and through activity-specific localization decisions, for example for certain roles in malls and shops. The franchisee carries these obligations, but they shape your staffing model, training plans and opening budget, so they belong in the business plan from day one. Contracts, wages and social insurance run through Qiwa, Mudad and GOSI; see accounting and payroll.
Royalties, fees and tax
Royalties, initial fees and technical service fees paid by a Saudi franchisee to a foreign franchisor are payments to a non-resident, and Saudi withholding tax generally applies. The Saudi payer usually deducts it and pays it to ZATCA, and the rate depends on the type of payment. A double tax treaty between Saudi Arabia and the franchisor's country may reduce the rate where its conditions are met. Imported services can also bring VAT under the reverse-charge mechanism.
- Define each fee clearly in the agreement: royalty, marketing fee, training, supply margin
- Agree who bears withholding tax and whether payments are grossed up
- Keep a current tax residency certificate if you rely on treaty relief
- Align franchisee invoicing with ZATCA e-invoicing
Practical tip: model your royalty after withholding tax before you fix the fee structure. Many franchisors only discover the net amount after the first payment arrives.
Notes for Korean, Japanese, Turkish and Chinese brands
K-food, Japanese dining, Turkish cafés and patisseries, Chinese tea and restaurant chains, and Asian beauty concepts all have an audience among young Saudi consumers. Success usually depends on localisation: halal sourcing with no pork or alcohol on the menu, Arabic menus and signage, flavour and portion adjustments, opening hours that follow local rhythms, and a strong presence on delivery apps. Operations manuals, recipes and training materials often need an Arabic version for staff and inspectors.
How RDO helps
We help you check the concept, coordinate the SAIP trademark filing, organise the disclosure document and its certified Arabic translation, and follow up registration with the Ministry of Commerce. We then support your franchisee with outlet licences, SFDA matters, Saudization planning and royalty invoicing. RDO works in Arabic, English and Chinese; for Korean, Japanese and Turkish brands we communicate in English and arrange certified translation where documents require it.
