Buying a Franchise in Saudi Arabia: How to Review the Joint Marketing Fund

Contributing to brand marketing may seem like a straightforward cost when buying a franchise, but its real value depends on how the money is managed and how its use is disclosed. In franchising, a high-profile campaign does not necessarily bring customers to your outlet. Review the joint marketing fund as a financial commitment that needs clear rules on spending and oversight, rather than simply a promise of greater brand awareness.

1. Understand what your contribution funds

Start with a direct question: are franchisees’ contributions pooled in a joint marketing fund, or does the franchisor charge for specific marketing services? The label alone does not tell you how the arrangement works. Ask for a written description explaining its purpose, who manages it, who benefits and how expenditure is reported to contributors.

Separate three commitments that may appear alongside one another in the offer: contributions to joint marketing, your outlet’s launch campaign and local marketing you carry out yourself. You may be required to pay for all three. Taking part in a wider campaign does not mean your launch budget or local advertising costs are covered.

Request a list of permitted spending categories, such as advertising space, content production, digital campaign management and agency fees. Ask specifically about salaries and administrative expenses: are these charged to the fund, and on what basis? A lack of clarity here could mean part of your contribution goes towards marketing administration rather than the advertising you expected.

Also distinguish between marketing products and services to customers and promoting franchise opportunities to attract new investors. Do not assume that funding the franchisor’s expansion benefits your outlet in the same way as a campaign aimed at buyers.

2. Know the statutory minimum for transparency

In Saudi Arabia, the relationship is governed by the Commercial Franchise Law, issued under Royal Decree No. (M/22), and its Implementing Regulations. Where a dedicated joint marketing account is established, the regulations include requirements for accounting and disclosure of how the money is used. These include providing the franchisee with a report on the account within four months of the end of the franchisor’s financial year.

Ask for the agreement to reflect these requirements clearly and to specify the applicable financial year, who sends the report and how it will be delivered. Do not confuse an annual reporting requirement with a guarantee of minimum sales or a commitment to spend an amount equal to your contribution on advertising your outlet. These are separate matters that need clear agreement if they form part of the offer.

The law also requires the franchisor to provide a prospective franchisee with a disclosure document at least 14 days before the franchise agreement is signed or any franchise-related payment is made, whichever comes first. Use this period to check that the marketing commitments in the disclosure document match those in the agreement and your business budget.

The statutory minimum for transparency is a starting point, not a substitute for negotiation. You can request more detail or more frequent reports, but distinguish these contractual requests from rights established by law.

3. Test the reporting before relying on promises

If the fund is already operating, request a sample of a previous report, with sensitive information redacted where necessary. The aim is not to access trade secrets, but to check that the report lets you understand the movement of money, rather than merely presenting campaign images and viewing figures.

Look for information that answers the following questions:

• What was the opening balance, and what were the total contributions and expenses for the period?
• How was spending divided between advertising, production and administration?
• Are any funds committed to campaigns that have not yet run?
• What balance remains, and how will it be used in future?
• Was any work carried out by parties connected to the franchisor, and how were they selected?

This is a checklist for review and negotiation, not a claim that every detail is expressly required by law. If the brand is only just launching its joint marketing programme, ask instead for the proposed reporting template, an estimated budget and a spending approval process.

Link the financial information to meaningful results. Greater advertising reach does not necessarily mean higher sales. Ask how store visits or orders attributed to campaigns are measured, while recognising that measurement may be approximate and cannot, on its own, establish why revenue has changed.

4. Agree on oversight and a process for handling objections

Discuss how spending is allocated across cities, channels and outlets, particularly if your outlet is far from areas where the brand has a strong presence. The aim is not necessarily to divide the money equally, but to understand the allocation criteria and whether campaigns cover your area or focus on channels that do not directly benefit your outlet.

Ask how franchisor-owned outlets are treated: do they contribute to the fund, and how are their contributions calculated? Then review the process for approving exceptional expenditure and handling unused balances or shortfalls. Do not assume that any remaining balance will be refunded to you when the relationship ends, or that a shortfall automatically entitles the franchisor to demand additional payments.

Also agree on a channel for enquiries, a response timeframe, a process for correcting errors and the extent of access to supporting expenditure records, while protecting confidentiality. If you do not receive the report or identify disputed expenditure, document your request and seek legal advice before unilaterally withholding your contribution. Raising an objection does not automatically give you the right to stop paying.

Practical takeaway: Before signing, bring together the fund description, permitted spending categories, sample report and objections procedure in one file. Do not buy a promise of wider exposure; agree on clear management of your money and a practical way to monitor it.