Saudi Arabia will allow selected high-growth and innovative sectors to offer franchises without meeting a long-standing operational experience requirement, in a move aimed at accelerating investment and broadening entrepreneurship.
The decision aligns with Vision 2030's goals to expand opportunities in sectors that support national economic growth and meet local market demand.
According to the information, the Council of Ministers approved the non-application of Article Five of the Franchise Law to certain franchisors. The article required businesses to operate for at least 1 year through at least two outlets before offering franchises.
The exemption targets key sectors, including transport and logistics, aviation and defense, entertainment and tourism, sports, healthcare, mining, and renewable energy.
The move is intended to strengthen the local economy’s regional and global competitiveness by creating a flexible environment that allows innovative projects to expand rapidly through franchising, without waiting for traditional establishment periods.
Franchisors must, however, present a clear and detailed business model, including a feasibility study and guarantees of success.
Strict criteria to protect franchisees
To ensure investment quality, the government has set specific conditions for benefiting from the exemption, including:
Franchisors must submit a clear, detailed business model that includes operational guidelines and a market analysis, serving as a practical manual supported by a feasibility study that underpins success.
The franchised activity must be innovative or offer a product or service that contributes to national economic development or meets local market demand. Applications will be assessed based on innovation, economic impact, or responsiveness to market needs.
The exemption also requires that franchisors not charge franchisees any consideration before operations begin. Fees may be collected only after revenues are generated, as defined in the agreement, to reduce operational risks for franchisees and link payments to actual performance.
Specialized committee
To ensure governance, the information revealed the formation of a specialized committee, chaired by the Ministry of Commerce, with members from the Ministries of Investment, Economy, and Planning.
The committee will evaluate exemption applications based on economic impact and the quality of the proposed business model.
A modern system for a secure investment environment
Saudi Arabia’s Franchise Law, approved in 2019, is considered a cornerstone of the Kingdom’s modern commercial regulatory framework. It aims to enhance transparency and clarity in the relationship between franchisors and franchisees, while providing legal protection for both sides.
The law promotes franchising activity in the Kingdom by establishing a clear regulatory framework governing the relationship between franchisors and franchisees, reinforcing transparency and clarity.
It provides necessary protections for both parties and enables informed investment decisions that help raise the quality of goods and services offered in Saudi Arabia.
The provisions of the Franchise Law apply to any franchise agreement implemented within the Kingdom. The law sets a minimum experience requirement for franchisors, regulates the contractual relationship between the parties, and defines their rights and obligations.
It also requires franchisors to disclose key risks, rights, and obligations associated with franchise opportunities, and governs the renewal, termination, or transfer of franchise agreements.
