Buying a Franchise in Saudi Arabia: Who Sets Prices and Pays for Discounts?

A discount campaign may look like a sign of a strong brand, yet it can increase your outlet’s sales while reducing its profitability. When buying a franchise in Saudi Arabia, knowing the product’s price or the cost of preparing it is not enough. You need to understand who sets the price, who funds the discount and how the sales proceeds reach you. Clarity on these details supports a balanced relationship within the franchise network and prevents disputes that could have been resolved before signing.

Separate brand identity from pricing authority

Start with a specific question: are the prices shown in the franchise offer recommended, mandatory or adjustable within a range approved by the franchisor? Do not assume the answer simply because outlets have similar price lists. That similarity may reflect an operational choice or a contractual obligation that needs reviewing.

Ask for a written statement setting out who controls pricing across each sales channel: in-store, direct orders, the brand’s app and delivery platforms. Also ask who can adjust prices when ingredient costs rise or location costs differ, and what procedures and timescales apply to approval.

The relationship in Saudi Arabia is governed by the Commercial Franchise Law and its Implementing Regulations. The law requires the agreement to include the franchisee’s obligation to follow instructions, marketing and presentation methods, and maintain the franchise’s identity, alongside details of financial consideration and other obligations. However, this does not remove the need to specify pricing and promotional arrangements in the contract, nor does it mean that every pricing restriction is automatically lawful. Have a lawyer assess the proposed restrictions under competition law as well.

Track the cost of a discount from advertising to settlement

The phrase ‘the brand will pay for the campaign’ is not enough to base a decision on. It may mean that the franchisor pays only for advertising, while the outlet funds the discount offered to customers. Ask for promotional costs, the value of the discount and order fulfilment costs to be shown separately.

Create a table for each expected type of offer, identifying who decides on it, whether the outlet must participate, how its contribution is calculated and when any reimbursement is due. In particular, cover the following:

• A reduced price for a product or meal for a limited period.
• A free product with the purchase of another.
• Redemption of vouchers bought through the app or at another outlet.
• Redemption of loyalty points against purchases fulfilled by your outlet.
• Combining a brand offer with a delivery platform discount.

Ask about cancellations and refunds too. If a discounted order is refunded, who bears the difference and any non-refundable fees? If your outlet honours a voucher whose payment was collected centrally, what documentation establishes your entitlement to payment, and when will you receive it?

Request a complete worked example for a single transaction, from the advertised price to the amount transferred to the outlet’s bank account. The example is a way to understand the process, not an income guarantee. Its rules should match the contract and financial schedule, rather than remaining in a separate presentation.

Test the margin per order, not just the increase in sales

Do not simply compare sales during the campaign with normal sales. Calculate what remains from each order after the discount and variable costs, then assess how much that amount can contribute towards rent, salaries and fixed overheads.

Use a worksheet that starts with the net sales value, separating out tax where applicable, then deducts the cost of ingredients, packaging, commissions, payment processing and other order-related charges. Show any reimbursement due from the franchisor separately, so that the distinction between transaction profitability and the timing of cash receipts is clear.

Check the basis for calculating franchise fees during the campaign: are they charged on sales before or after the discount? How are vouchers and refunds treated? The aim here is not to review every fee again, but to identify how the discount affects the amount left for your outlet.

Ask your accountant to test three scenarios without relying on preset percentage assumptions: a standard order, a discounted order and a discounted order placed through a platform that charges commission. Then ask whether the increase in orders requires extra staff or creates more waste. An offer may look viable at product level but become costly when fulfilled at volume.

Turn the answers into written safeguards before committing

Negotiate a clear pricing and promotions schedule, rather than a general promise that campaigns will ‘take everyone’s interests into account’. The schedule could include a notice period, a process for presenting expected costs, reimbursement and settlement rules, and a procedure for requesting a justified exemption. These are points for negotiation, not automatic rights granted by franchise law for every campaign.

Also specify how errors will be handled. Who corrects a price published incorrectly in the app? How can the outlet challenge an underpayment in a settlement? What documents and review period will apply? A clear procedure is more useful than leaving every dispute to an unstructured exchange of messages.

The Commercial Franchise Law requires the franchisor to 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 check the answers against the documents, and ask for any material discrepancy to be documented before committing.

The practical takeaway: Do not agree to open-ended participation in discount campaigns until you know who makes the decisions, what costs you will bear and how settlement works. Take a real order example, calculate its impact with your accountant, then have your lawyer formalise the rules in the agreement or an attached schedule.