Buying a Franchise in Saudi Arabia: How to Check Who Owns the Outlet’s Equipment

A franchise offer may describe an outlet as ‘fully equipped’, but that does not necessarily mean you will own every piece of equipment on the premises. Some items may be leased, supplied for use subject to conditions, or covered by a separate agreement with a supplier. In the Saudi franchise market, protecting your investment starts with distinguishing between the cost of fitting out an outlet and ownership of its assets. These checks matter whether you are opening a new outlet or buying an existing one.

1. Turn the fit-out offer into a clear asset list

Do not settle for a lump sum under ‘equipment and fittings’. Ask for an itemised list covering each major asset: its description, model, condition, quantity, price and the party that will issue the invoice. For equipment already on site, add its serial number and physical location so that you do not end up reviewing documents for a different item from the one you will receive.

Divide the list into four categories: assets you will buy and own; assets you will lease; assets you are allowed to use without acquiring ownership; and items whose status has yet to be confirmed. That last category is not a detail to leave until later: it needs to be clarified before you approve the budget.

Ask about smaller devices too. You might own the till, for example, while payment terminals or display screens are supplied by another party. You may also own a device but need a subscription or software licence to operate it that does not transfer to you automatically.

Ask for this list to match the quotation and the fit-out schedule attached to the agreement. If an item changes before delivery, the replacement, its specifications and any financial implications should be documented, rather than simply describing it as ‘equivalent’.

2. Check proof of ownership and the seller’s right to sell

An invoice is a starting point, but it does not answer every question on its own. Check the buyer’s name, the asset description, whether the price has been paid and whether any conditions delay the transfer of ownership. If the franchisor is selling you equipment it bought from a supplier, ask for evidence that it has the right to sell it to you.

For an existing outlet, compare the asset list with the equipment actually on site, using an independent technician if necessary. An item may be present and working without belonging to the party you are negotiating with. Request a written statement identifying leased or financed equipment and any third-party rights that could affect its transfer or continued use.

Ask the following questions about each high-value asset:

• Who owns it now, and who will own it after payment?
• Is it subject to a lease, finance agreement or retention-of-title clause?
• Does its transfer require a third party’s consent or settlement of an outstanding amount?
• What document will prove that ownership has transferred to me, and when will I receive it?

If a finance provider or supplier has rights over an asset, do not rely on a verbal promise that these will be removed later. Have the documents reviewed by a legal adviser, and make evidence of settlement or the required consent a condition of completing the purchase of that asset.

3. Address equipment ownership in the Saudi franchise agreement

Franchising in Saudi Arabia is governed by the Commercial Franchise Law and its Implementing Regulations. Under Article 11 of the Law, the agreement must specify the consideration payable by the franchisee to the franchisor and the method for calculating payments for goods or services supplied by the franchisor or anyone within its group. Relevant supply obligations must also be set out.

These requirements make equipment checks part of reviewing the agreement, rather than simply comparing commercial quotations. They do not, however, mean that paying the franchise fee automatically gives you ownership of the outlet’s equipment and fittings. That requires clauses and documents specifying what you are actually buying.

The Law also requires the franchisor to provide the disclosure document at least 14 days before the franchise agreement is signed or any consideration relating to the franchise is paid, whichever comes first. Pay particular attention, therefore, if you are asked to make a fit-out payment to the franchisor before signing. Before paying, ask for clarification of the payment’s purpose and how it relates to the franchise.

Negotiate a schedule identifying the seller and buyer, the equipment included, when ownership transfers, responsibility for damage during transport and installation, and the procedure for accepting equipment or rejecting items that do not meet the agreed specifications. These are suggested contractual protections for the transaction, not a separate list of statutory requirements that apply in every case.

4. Calculate the cost of use, not just the purchase price

Compare buying and leasing equipment on the basis of the total cost over its expected period of use. Include the initial payment, instalments, maintenance, insurance if required, software needed to operate it, and charges for returning or dismantling it at the end of the lease. Do not assume that the option with the lowest upfront payment will cost the least overall.

Also check how the equipment lease term aligns with the term of the franchise agreement. If your right to operate under the brand ends but your lease obligations continue, can you terminate the lease, move the equipment or use it in another business? Look for the answer in the relevant contract, not the marketing material.

Before making the final payment, carry out a documented handover that includes checking the equipment against the agreed list, testing its operation and collecting invoices, warranties and user manuals. Record any outstanding issues, set a deadline for resolving them and agree in advance how they will affect when payments fall due.

The practical takeaway: Do not pay for a ‘fully equipped outlet’ until you know, asset by asset, what you will own and what you will only have temporary use of. A clear asset list, verifiable ownership documents and written handover terms will help you make a better-informed purchase and reduce surprises after opening.