Buying a Franchise in Saudi Arabia: How to Review the Branch Opening Schedule

The opportunity to open several branches may seem an attractive way to build a presence in Saudi Arabia’s franchise market. But an opening schedule is more than an ambitious plan: it can become a contractual obligation, and failing to meet it may mean losing rights or money. Before buying a franchise involving phased expansion, test your ability to deliver the schedule and establish what happens if a single branch is delayed, rather than focusing solely on the eventual number of branches.

1. Understand whether expansion is a right or an obligation

Start with the most important question: does the agreement give you the option to open additional branches, or require you to open them by specified dates? There is a significant difference between a right you can exercise when conditions are suitable and a commitment whose non-performance constitutes a breach of contract. Do not rely on the offer being described as a ‘development opportunity’; read the binding wording in the agreement and the schedule annex.

In Saudi Arabia, the relationship is governed by the Commercial Franchise Law, issued under Royal Decree No. M/22 of 1441 AH, and its Implementing Regulations. The law applies to franchise agreements carried out within the Kingdom. A franchise agreement must be written and signed, and must include, among other details, a description of the franchise business, its duration, how the agreement may be amended and its geographical scope.

Do not, therefore, leave the branch opening programme in a presentation separate from the contractual documents. Ask for clarification of how the expansion annex forms part of the agreement and which provisions prevail if there is a conflict. If the agreement is drafted in another language, a certified Arabic translation is required; pay particular attention to the translation of wording concerning obligations, extensions and the loss of rights.

Create a short checklist for each branch: its opening date, whether it is mandatory or optional, the approval needed to proceed and the document governing its operation. Ask whether each branch will have a separate agreement or whether all branches will fall under a single agreement.

2. Turn the opening deadline into verifiable milestones

The phrase ‘open the branch within the specified period’ is not enough on its own. What counts as opening: completing the fit-out, obtaining licences, welcoming customers or receiving the franchisor’s final approval? Different definitions could mean you consider your obligation fulfilled while the franchisor considers you late.

Break the process into clear milestones, such as site approval, approval of plans, completion of works, installation of systems and fulfilment of operating requirements. For each milestone, identify the responsible party, the document that proves completion and the time allowed for the other party to review it. These are suggested points for negotiation, not statutory time limits that apply uniformly to all franchises.

Ask for the following questions to be addressed in writing:

• When does the opening period start: on signing, or once specified conditions have been met?
• What information is needed for an approval request to be considered complete?
• How will delays by the franchisor in reviewing plans or carrying out an inspection be documented?
• Will the deadline be extended if the franchisor changes its requirements during implementation?
• How will delays involving the relevant authorities or the contractor be handled, without assuming they automatically excuse late performance?

For example, if work depends on the franchisor approving the plans, setting a deadline for you alone is not enough. Negotiate a clear response period for the franchisor and a mechanism for documenting the impact of delays and adjusting the schedule where warranted.

3. Test the expansion plan before turning it into a financial commitment

Do not assess the schedule solely against a best-case scenario. Gather realistic delivery estimates from the parties you will rely on, then review how much the branch fit-outs will overlap. Opening each branch individually may be feasible, while delivering them together may prove harder because of limited management, supplier or supervisory capacity.

Link each deadline to the payments and commitments it triggers: fees for the next branch, fit-out orders, implementation costs and recruitment commitments. The aim here is not to prepare a full project budget, but to establish whether the expansion schedule forces you to take on financial commitments for a new branch before the previous one is operating steadily.

Seek alternatives in negotiations, such as making some branches future options, requiring a joint review before the next phase begins or allowing an agreed rescheduling. Do not treat these alternatives as automatic entitlements; whatever both parties accept must be clearly included in the contract.

Remember that the franchisor must provide you with the disclosure document at least fourteen days before you enter into the franchise agreement or pay any consideration relating to the franchise, whichever comes first. Do not let pressure to secure the expansion programme lead you to bypass this review period before paying or signing.

4. Review how delays could affect existing branches

The most serious question is not always how much a delay will cost, but how far its consequences extend. Would a failure to open a new branch mean losing only the right to open the remaining branches, or does the agreement also seek to link that failure to agreements for branches already operating? Ask a lawyer to examine the cross-default and termination clauses and their compliance with the law. Do not assume that every written sanction is enforceable as drafted.

Negotiate a clear process that starts with a notice identifying the delay and its causes, followed by a procedure for remedying it and a statement of the consequences if it is not remedied. Establish what happens to sums paid for branches that will not open: will they be refunded, carried forward or reduced by specified costs? Do not settle for a verbal promise to consider the matter later.

Keep dated copies of the schedule, approvals, extension requests and any signed amendments. The practical takeaway: do not sign an expansion schedule until you understand what it requires of you, what depends on the franchisor, how deadlines can change and which rights remain protected if one branch runs into difficulties.