Buying a Franchise in Saudi Arabia: How Do You Align the Franchise Agreement with Your Lease?

You may choose the right brand, only for the deal to stall because you leased premises before checking their suitability or securing the franchisor’s approval. In Saudi Arabia’s franchise market, attractive premises alone are not enough: your lease obligations must align with your rights and obligations under the franchise agreement. This guide helps you coordinate both contracts before committing sums that may be difficult to recover, while keeping brand approval distinct from the legal ability to operate at the site.

1. Distinguish Franchisor Approval from Site Suitability

Franchisor approval usually means that the site meets the brand’s standards. It does not replace checks on whether the premises are suitable for your activity and meet licensing requirements. Equally, a landlord’s willingness to let the premises does not mean that all the necessary fit-out works are permitted or technically feasible.

Before signing a binding lease, gather three sets of information:

• Brand requirements: floor area, frontage, internal layout, storage and the site’s capacity to accommodate equipment.
• Property conditions: permitted use, electrical capacity, drainage, ventilation and any landlord consents needed for alterations.
• Regulatory requirements for operation: the licences and approvals your business needs from the relevant authorities, depending on its activity and location.

Ask a technical specialist to assess the actual premises against these requirements. For a food business, for example, the extraction duct route or electrical capacity could become an expensive obstacle, even on an excellent high street.

Obtain the franchisor’s approval in writing, identifying the specific site and plans reviewed. If approval is conditional, record the conditions, who is responsible for fulfilling them and the deadline for resolving them. Do not treat an encouraging message about the site or a visit from a sales representative as final approval to begin the fit-out.

2. Sequence Your Commitments Before Making Non-refundable Payments

Franchising in Saudi Arabia is governed by the Franchise Law, issued under Royal Decree No. M/22 dated 9/2/1441 AH, and its Implementing Regulations. The law applies to franchise agreements performed within the Kingdom. It requires the franchisor to provide the disclosure document at least 14 days before the franchise agreement is signed or any franchise-related payment is made, whichever occurs first.

This period concerns your commitment to the franchise opportunity; it does not automatically make a separate lease cancellable. Do not assume, therefore, that you can recover a deposit on premises simply because your franchise review is still under way.

The best sequence will vary between transactions, but it should minimise irreversible commitments. Where the parties are willing, negotiate an arrangement that allows the site to be inspected and approved, and licensing requirements checked, before substantial payments fall due. This could take the form of a conditional reservation or clearly drafted contractual conditions, subject to legal review.

For each arrangement, specify: what condition must be met, who confirms that it has been met, the deadline and what happens to payments if it is not met. Do not rely solely on wording such as ‘subject to approvals’: the parties may later disagree about which approval was required or why it was refused.

These are suggested safeguards to negotiate, not automatic rights that the Franchise Law imposes on landlords.

3. Align Timelines and Allocate Responsibility for Delays

Place the franchise agreement, draft lease and fit-out schedule side by side. Then create a single timeline running from handover of the premises to the expiry of both contracts, identifying who is responsible for each step.

Pay particular attention to the following:

• Rent commencement: is rent payable from signing or from handover? What condition must the premises be in at handover?
• Fit-out period: is there a written rent-free period, and which costs remain payable during it?
• Opening deadline: does the franchise agreement impose a deadline, and can it be extended if approval of the plans or handover of the property is delayed?
• Term of occupation: does the lease allow you to operate throughout the franchise term, or does it expire earlier?
• Renewal: does renewal of either contract depend on a consent that you are not guaranteed to obtain under the other?

For example, if rent starts immediately on handover while design approval is still pending, you could be paying rent without being able to begin work. The solution is not simply to set aside a financial contingency: it is to agree response deadlines, a process for dealing with delays and their contractual consequences.

Also ask for written confirmation of who bears the cost of alterations required after the plans have been approved. A later request to relocate equipment or change the frontage could affect both costs and the opening date.

4. Test What Happens If You Cannot Open Before Signing

Ask your lawyer to test both contracts against specific scenarios: a licence is refused, brand requirements cannot be met, the property is not handed over, or the deadline passes without site approval. The aim is not to anticipate every problem, but to understand your obligations if the business never opens.

For each scenario, record clear answers: can you terminate the relevant agreement? Is notice or a period to remedy the issue required? Which payments are refundable? Who is responsible for removing fit-out works and reinstating the premises to the agreed condition?

If the franchisor proposes an alternative site, do not assume that relocation will be free or that the original landlord will release you from your obligations. Ask for the alternative site approval process, deadline and costs to be specified, while dealing separately with the lease for the original premises.

Keep a single file containing the site approval, inspection report, plans, landlord consents, both contracts and their schedules. Make sure material promises are incorporated into clear contractual documents rather than left in conversations.

The practical takeaway: do not sign a binding lease simply because you are optimistic about opening. Confirm the site’s suitability, align the timelines and set out in advance what happens if you cannot operate. These checks protect your franchise investment decision before rent becomes an obligation with no income to cover it.