Buying a Franchise in Saudi Arabia: Who Can Amend the Agreement?

You may agree favourable terms with a franchisor, only to discover that the agreement gives them broad powers to change those terms through a circular or a new version of the operations manual. So do not review your obligations only as they stand on signing day; also check who can change them later, and how. In Saudi Arabia’s franchise sector, a clear amendment process helps protect your investment while leaving reasonable scope to improve the customer experience and working practices.

1. Start by understanding what the law requires and what needs negotiating

Saudi Arabia’s Commercial Franchise Law and its Implementing Regulations govern franchise relationships in the country. The law applies to any franchise agreement performed within the Kingdom. Article 11 requires the agreement to state, among other essential details, its duration, the procedure for amending it and its geographical scope. The amendment process is therefore not a detail to leave until after operations begin.

The agreement must also be written in Arabic and signed by both parties, or accompanied by a certified Arabic translation if drafted in another language. The franchisor must provide the disclosure document at least fourteen days before the agreement is signed or any payment relating to the franchise is made, whichever comes first. Use this period to compare the amendment powers with the obligations on which you based your decision to buy.

However, the requirement to specify an amendment procedure does not mean that every proposed clause is commercially suitable for you. Ask a lawyer to review any wording that allows the franchisor to change terms unilaterally, including the scope and effect of those powers. Do not assume that objecting later will prevent a change that the agreement already permits.

2. Separate operational updates from changes to the deal

Franchisors need to update operating procedures to maintain brand consistency. This might involve the sequence of service steps, hygiene instructions or quality monitoring forms. But changing a day-to-day procedure is different from adding a financial obligation, extending your liability or restricting a contractual right you were relying on.

Read every clause referring to ‘policies adopted from time to time’ or ‘the operations manual, as amended’. Then ask: does this reference merely allow the franchisor to regulate how the agreement is carried out, or does it effectively allow them to rewrite the deal? Ask for a clear distinction between matters that can be updated administratively and those requiring both parties’ written consent.

During negotiations, you could propose the following categories:

• Routine operating procedures: updated within a defined scope and through an agreed notification process.
• Changes with a material impact: subject to an impact assessment and consultation on implementation.
• Core contractual rights and obligations: amended only through a signed addendum under the agreed procedure.

These are suggested negotiating categories, not fixed legal classifications. What matters is that the boundaries are clear and that the agreement specifies which document takes precedence if its terms conflict with the operations manual or a later circular.

3. Test the amendment clause against realistic scenarios

Rather than simply asking the franchisor whether the clause is ‘standard’, test it against scenarios that could change the financial viability of your outlet. For example, what happens if a new circular requires the outlet to open for longer hours, offer an additional service or provide discounts that were not included in your original plan?

For each scenario, ask for written answers on four points: the contractual basis for imposing the change, the notice period, who bears the financial impact and what happens if you cannot implement it on time. A change may have a reasonable objective but be difficult to put into practice at your location or within your employees’ existing working arrangements.

Also ask for a previous example of a significant update and how it was implemented by franchisees. You are not looking for a promise that nothing will change; you are looking for a structured process that lets you understand the requirements, calculate their impact and request a suitable implementation period. You can also ask existing franchisees whether notices arrive reliably and are clear, without seeking confidential information about their agreements.

Pay particular attention to any wording that treats continued operation as automatic acceptance of an amendment. Discuss its implications with your adviser, and propose that silence or continued trading should not replace written consent where a core contractual change is concerned. Also specify how objections should be submitted and who is authorised to respond.

4. Document amendments and define the approval process

Before signing, ask for a practical process that begins with a written amendment request setting out the existing and proposed wording, the reason for the change and its effective date. The process should allow time to review the operational and budgetary impact before approval. It should also identify each party’s authorised representatives, rather than relying on conversations with support staff.

Keep a dated copy of the operations manual referred to in the agreement, along with a record of subsequent versions, notices and approvals. If confidentiality concerns prevent the full manual from being supplied before signing, request a suitable arrangement to review significant obligations and the process for changing them before you commit.

It is important here to distinguish between the parties’ approval of an amendment and its registration with the Ministry of Commerce. Under the registration requirements, if either party to the franchise agreement or its duration changes, the franchisor must register the amendment within ninety days of making it by filing a copy of the signed amendment. Do not confuse this administrative procedure with the question of whether the amendment is valid and whether you have consented to it; each requires a separate review.

The practical takeaway: Do not buy a franchise based solely on today’s terms. Establish what can be updated, what requires your signature and how you will receive notice, then keep a clear record of every change before it is implemented.