Buying a Franchise in Saudi Arabia: Check the Franchisor’s Rights to the Trade Mark

You may reach an agreement with a well-known brand, only to discover that the company negotiating with you does not own it, or that its licence does not allow it to grant franchises to others. In the Saudi franchise market, checking rights to the trade mark is a separate exercise from assessing the brand’s commercial appeal. Your aim is not simply to see a registration certificate, but to establish a clear chain of rights from the trade mark owner to the party signing the agreement with you, covering the use you will be paying for.

1. Separate the brand name from the identity of the contracting party

Start by identifying three parties that may be different: the trade mark owner, the franchisor and the company receiving payments. Differences are not necessarily a sign of a problem, but they require a documented explanation. One company may own the trade mark while another grants franchises under a licence. Alternatively, the party negotiating with you may be a master franchisee with the right to grant sub-franchises.

Ask for the franchisor’s full legal name, commercial registration details and evidence of the proposed signatory’s authority to sign the agreement. Then check these against the draft contract, invoice and payment instructions. If you are asked to transfer fees to another entity, request a written explanation of its authority to collect the money and how paying it affects your payment obligation to the franchisor.

Do not treat a website, a verified social media account or the existence of outlets trading under the name as sufficient evidence of authority to enter into the agreement. The practical question is: What document gives this particular company the right to allow me to use the trade mark under the franchise model?

2. Check registration and the scope of protection in Saudi Arabia

Ask for the trade mark registration documents and evidence of its current status. Verify the details through the available services of the Saudi Authority for Intellectual Property or with specialist assistance. Review the owner’s name, registration number, representation of the mark, the goods or services covered and the expiry date of protection. Do not rely on an old copy that fails to show subsequent changes.

Registration in another country does not, on its own, establish protection within Saudi Arabia. Likewise, a registration application is not the same as a completed registration. If the application is still under examination, that is a risk requiring a clear legal assessment, not a verbal assurance that the process will be completed soon.

Compare the registered mark with what you will actually use on your shopfront, packaging and apps. Do the rights cover the Arabic name, the foreign-language name and the logo, or only one of them? Do the registered goods and services cover the proposed business activity? Also ask for clarification of any opposition, dispute or change of ownership that could affect its use. These are due diligence questions, not an assumption that every discrepancy invalidates the agreement.

3. Trace the licensing chain if the franchisor is not the owner

If the franchisor is a licensee, ask to see evidence that it can grant you the intended use, rather than merely operate its own outlets. A licence to use a trade mark does not automatically include permission to license it to others or grant sub-franchises.

Focus the legal review on four points:

• Authority: Does the upstream agreement permit the franchisor to grant the rights it is offering you?
• Scope: Does it cover Saudi Arabia, the proposed business activity and the intended channels of use?
• Term: Will the rights remain in force throughout your agreement, and what are the renewal arrangements?
• Continuity: What happens to your agreement if the upstream licence expires or is terminated early?

The franchisor may refuse to provide its full agreement for confidentiality reasons. In that case, suggest that your lawyer review it under a confidentiality undertaking, or request authenticated extracts and direct consent from the owner where necessary. Do not treat a general letter referring to a ‘partnership’ as a substitute for evidence of authority. If a crucial provision cannot be verified, record it as an unresolved risk before deciding whether to buy.

4. Link your checks to Saudi franchise law

Franchise relationships in Saudi Arabia are governed by the Commercial Franchise Law, issued by Royal Decree No. M/22 dated 9/2/1441 AH, and its Implementing Regulations. The definition of a franchise includes the association of the business with a trade mark or trade name owned by the franchisor or licensed for its use, alongside other elements such as know-how and operating methods.

You should therefore not insist that the franchisor must always own the trade mark; the key is to verify that its rights allow it to grant what it is offering you. Conversely, an agreement limited to the use of a trade mark does not become a franchise agreement simply because it is labelled as one: the law excludes standalone licensing agreements of the kind specified in its exemptions.

The law requires the franchisor to provide you with a disclosure document at least fourteen days before you sign the franchise agreement or pay any consideration relating to it, whichever comes first. Use this period to complete your checks on the rights involved, rather than treating it as a mere waiting period. Under the Implementing Regulations, the franchisor must also register the agreement and disclosure document with the Ministry of Commerce within ninety days of signing. However, that registration does not replace checks on trade mark ownership and the licensing chain.

5. Turn your findings into contractual protection

Ask for a precise list of the trade marks you are allowed to use to be attached to the agreement, and for responsibility for renewing protection and maintaining the necessary licences to be clearly allocated. Discuss including a representation from the franchisor that it has the required authority, together with an obligation to notify you of any dispute or material change affecting it.

Also establish who will handle infringement claims and who will bear the cost of replacing signage and packaging if lawful use becomes impossible. Discuss remedies if use has to stop, including refunds or compensation, depending on the circumstances, the agreed wording and applicable law. Do not assume these outcomes are automatic. These are protections to negotiate, and a Saudi lawyer should tailor them to the agreement.

The practical takeaway: Do not pay for a well-known name before checking who has the right to let you use it. Gather evidence of registration and the licensing chain, then make sure your contract clearly defines the scope and continuity of use, and responsibility for protecting those rights.