Delayed Franchise Openings in Saudi Arabia: Plan Before You Grant

When you decide to franchise an established business, you may focus on choosing a franchisee and signing the agreement, only to discover that the outlet is still a long way from welcoming customers. Delays to fit-out works, equipment deliveries or design approvals can drain cash and undermine trust before the first sale. Franchisors and franchisees therefore need a clear process for managing the period between signing and opening, rather than an ambitious date whose details are left to subsequent correspondence.

Separate the opening date from marketing promises

Start by defining what ‘opening’ means in your documents: a limited operation to test systems, opening to the public with a full service, or launching the advertising campaign? Using the same word for all these stages makes it difficult to establish whether a delay has occurred and determine its consequences. Adopt a clear contractual definition, distinguishing any trial operation from the approved commercial opening.

In Saudi Arabia, the relationship is governed by the Commercial Franchise Law and its Implementing Regulations. The law applies to any franchise agreement performed within the Kingdom. Article 11 requires the agreement to be written in Arabic and signed by both parties, or accompanied by a certified Arabic translation if drafted in another language. Make the opening arrangements an explicit part of the agreement or a schedule to it, rather than a verbal promise from a sales representative.

The disclosure document must also be provided at least fourteen days before the agreement is signed or any payment relating to the franchise is made, whichever comes first. Do not let the pressure to secure a contractor or catch a peak trading season become a reason to bypass this period. The operational timescales you propose for completing the fit-out are not general statutory deadlines; they are arrangements that require careful agreement and legal review.

Build the schedule around milestones, not a single date

Rather than simply stating that ‘the outlet will open after signing’, map out the sequence of stages needed to make opening possible. Use your experience with existing outlets to estimate timings, allowing for differences in the condition of the premises and the scale of the fit-out. Do not treat your fastest previous opening as the standard timescale for every franchisee.

Create a schedule with four elements for each stage: the responsible party, the document required to start it, evidence of completion, and the tasks that depend on it. This could include:

• Handover of the premises in the agreed condition, with a record confirming that they are ready for fit-out works to begin.
• Approval of plans, identifying the version the contractor is authorised to work from.
• Ordering equipment and confirming its delivery and installation, rather than merely issuing a purchase order.
• Activating systems and testing payments, connectivity and ordering before welcoming customers.
• Completing operational requirements and carrying out a final readiness review.

Include the expected time for the franchisor to respond to complete submissions. If the franchisee cannot start work until a plan is approved, it is not reasonable to assess their compliance with the works deadline while ignoring delays in approval. Also define when a submission is considered complete, so that the response period neither starts with an incomplete file nor pauses because of an undocumented comment.

Allocate the consequences of delay according to its cause

Not all delays are alike. A franchisee may be late submitting a document, a franchisor may delay approving a design, a supplier may run into difficulties, or a problem may emerge at the premises. Establish a process that records the cause and examines its actual effect on the opening date before any financial or contractual decision is made.

The agreement can distinguish between delays attributable to either party, delays involving third parties, and exceptional circumstances requiring a separate assessment. These are suggested categories for managing delays, not automatic legal rules. Describing a cause as external does not absolve everyone of responsibility: choosing the supplier or placing the order too late may be the underlying cause.

Discuss the following questions with your legal adviser before granting a franchise:

• When do recurring fees start to accrue if trading has not begun?
• Who bears the cost of a repeat visit by the fit-out team if it cannot carry out its work?
• How will you deal with advertising or service bookings that can no longer be used?
• How does a delayed opening affect the period during which the franchisee can actually benefit from the franchise?

Avoid imposing a standard penalty for every delay without examining responsibility, loss and legality. Instead, specify the agreed response to each situation, without making the franchisee bear costs arising from the franchisor’s failure simply because the outlet did not open on time.

Establish a written process for extensions and getting back on schedule

Make an extension request an early step, not an admission made after the deadline has passed. The request should explain the obstacle, when it arose, the stages affected, the proposed action to reduce the delay, and a revised date supported by credible confirmations. An authorised representative of the franchisor should respond in writing, approving the request, seeking further information or giving reasons for refusal.

When an extension is approved, update the entire schedule, not just the opening date. Review the timing of staff arrivals, stock deliveries, advertising and visits, and specify who will notify each relevant party of the change. If the agreed response involves changing the term of the franchise agreement, check the requirements for registering the amendment: the Implementing Regulations require an amendment changing either party to the agreement or its term to be registered within ninety days of being made.

Practical takeaway: Before granting your first franchise, prepare a schedule of opening milestones, a template for documenting delays and a written process for approving extensions. The best opening timetable is not the shortest, but one whose requirements both parties understand, with a clear way to address setbacks.