Offering a Franchise in Saudi Arabia: The One-Year Business Model Requirement

A legal commentary published by the Al-Mazyad Law Firm blog on 29 September 2026 has drawn renewed attention to a requirement that applies before franchise opportunities can be marketed in Saudi Arabia: the franchise business must have been operated under the business model for at least one year, by at least two persons or at two separate outlets. The commentary highlights the importance of checking whether an opportunity is eligible to be offered, rather than focusing solely on the brand’s appeal or the terms of the agreement.

Testing the model comes before offering the opportunity

According to the commentary, Saudi Arabia’s Commercial Franchise Law restricts the offering of franchises until the business model has been shown to work in practice. As a general rule, a franchise opportunity may not be offered or granted unless the business has been operated for at least one year, by at least two persons or at two separate outlets. One of those persons may be the franchisor or a member of its group.

The significance of this provision is that it applies at the offer stage itself, not merely when an agreement is signed or a franchisee opens an outlet. Questions about when the model began operating and how many outlets have used it should therefore come before treating an opportunity as ready to market.

The commentary does not present this rule as a new legislative amendment. Rather, it explains it within the existing framework governing the relationship between franchisor and franchisee. What is new here is the renewed emphasis on readiness in a recent legal commentary, not the announcement of a new deadline or a change to the conditions for operating a franchise.

A local requirement for sub-franchising

The commentary also addresses franchisees with the right to grant sub-franchises where the original franchisor does not itself operate the business in Saudi Arabia. In this situation, the holder of that right may not offer a sub-franchise before operating the franchise business within the Kingdom for one year, subject to the statutory conditions cited in the commentary.

This requirement deserves attention from those considering the Saudi franchise market, particularly when assessing opportunities involving a foreign brand or sub-franchising rights. In the circumstances described, a contractual right to grant franchises to others does not remove the requirement to operate locally before offering opportunities.

In practical terms, this rule directs attention to the operating track record within Saudi Arabia, alongside the rights holder’s relationship with the original franchisor. The useful question for an investor is not simply: does the other party have the right to grant a franchise? It is also: has that party met the local operating requirement applicable to its circumstances? Reviewing the facts of each case remains essential, as the commentary links the rule to specific circumstances rather than presenting it as a universal condition for every form of franchising.

What should you check about the business model?

The commentary defines franchising as one person granting another the right to carry on specified business activities on their own account, linked to a trade mark or trade name, with the provision of technical know-how and operating methods, in return for financial or non-financial consideration under the agreement. This definition places the operating model at the heart of the relationship, rather than reducing the opportunity to the use of a familiar name.

On that basis, prospective franchisees can make readiness checks a distinct part of their assessment. These include asking when the business began operating under the proposed model, which persons or outlets have applied it, and how the one-year requirement applies to the opportunity under discussion. These are practical questions derived from the requirements discussed in the source, not a new mandatory document checklist.

Nor should completion of the required operating period be treated as a guarantee of profitability. The commentary sets out a statutory condition for offering and granting a franchise; it provides no data on brand sales, investment returns or franchisee success rates. Distinguishing eligibility to offer an opportunity from its financial viability keeps the assessment realistic and avoids turning an operating period into a commercial promise unsupported by the source.

From eligibility to offer a franchise to operational clarity

Once the operating requirement has been checked, how the model will be transferred to the franchisee remains a central issue. The commentary explains that the agreement must specify and describe the franchise activities, training, technical and marketing support, the supply of goods and services, and the use of trade marks and intellectual property rights. It also emphasises the need for clearly defined operating manuals, quality standards, oversight and approved suppliers.

These elements help connect the previous operating experience with what the franchisee will actually receive. The question is not simply whether outlets have operated for long enough, but whether the agreed operating methods, support and supply arrangements are clear. For the franchisor, settling these details before offering the opportunity makes discussions with investors more specific, without assuming that the passage of one year resolves every aspect of readiness.

Practical takeaway: Before marketing or committing to a franchise opportunity, check how long the model has been operated and whether it has been applied by the required number of persons or outlets. For sub-franchising in the circumstances described, also check the local operating requirement. Then assess compliance with the requirements for offering the franchise separately from the opportunity’s financial and operational viability.