Buying a Franchise in the UAE: Check Business Licensing Requirements Before Signing

You may choose a successful brand and accept its financial terms, only to discover that some of its services require approvals you had not planned for. In the UAE franchise market, permission from the franchisor to use the brand does not replace a licence to carry out the business activities concerned. Before buying, start with a specific question: can the model you are purchasing, in all its detail, operate under the licences and approvals required in the relevant emirate?

Turn the brand’s business model into a list of actual activities

Do not settle for a marketing description such as a ‘care centre’ or ‘food concept’. Ask the franchisor for a written description of what the outlet does each day, what it sells, where it provides its services and who delivers them. A model may combine product sales with a specialist service, delivery or preparation, while each activity has different requirements.

Create a table listing each activity, the relevant licensing authority, any potential additional approvals, the documents required and the person responsible for following them up. Check it with the licensing authority and, where necessary, a local adviser, rather than inferring the requirements from another outlet’s licence.

For example, do not assume that an education, healthcare or food business can operate under a general trade licence. The nature of the work may call for specialist approvals or specific requirements for the premises and staff. This depends on the actual service and where it is provided, not simply on the brand name.

Also ask about activities that underpin sales forecasts but fall outside the core operation. If projected profitability assumes that an additional service will be offered, confirm that it can be licensed before relying on those projections. Temporarily exclude its revenue from your feasibility study if its status remains unresolved.

Understand the difference between a franchise agreement and an operating licence

The UAE has no standalone federal law dedicated to franchising, nor a general federal regime requiring a disclosure document for every franchise offer. The relationship is governed by the relevant civil and commercial rules, including Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law, alongside trade mark legislation and local licensing requirements. Federal Law No. 3 of 2022 regulating commercial agencies may apply if the relationship meets the conditions for its application and registration; not every franchise agreement is a registered commercial agency.

Licensing the business activities is a separate process from establishing contractual rights between you and the franchisor. In Dubai, Law No. 13 of 2011 regulates the conduct of economic activities and makes carrying them out subject to licensing under its provisions, with the necessary requirements, documents and approvals specified. Check which authority and regulatory framework apply to your location, particularly if you are dealing with a free zone or a regulated activity.

In practice, ask for written confirmation of the activity classification and the requirements that apply to your proposed business. Do not treat the franchisor’s approval of the model, or the existence of other outlets of the brand in the UAE, as sufficient evidence that your business meets those requirements. Incorporating a company or reserving a trade name does not, on its own, mean that you have full permission to operate.

Check the franchisor’s documents and whether the model can comply

Ask the franchisor for a technical documentation pack to support licensing: service descriptions, equipment specifications, operational plans, staffing requirements and any certificates or documents relating to products and procedures. Identify what is already available and what needs to be prepared, translated or attested, depending on the relevant authority’s requirements.

Existing franchisees’ experiences can be useful, but treat them as practical indicators rather than legal guarantees. Ask them: which documents were delayed? Did the model need to be adapted? Who paid for those changes? Did the franchisor supply the technical documents in the required format?

Pay particular attention to conflicts between the operations manual and local requirements. The franchisor may insist on equipment, a layout or a procedure that does not meet the relevant authority’s requirements. Before buying, ask for a clear process for approving changes needed for compliance, including who will review them and who will pay for them.

Base your cost estimate on actual quotations and published fees where available. Separate licence and approval fees from the costs of consultants, inspections, technical modifications and permit renewals. Do not rely on a lump-sum estimate from the franchisor without a breakdown of what it includes and excludes.

Allocate licensing responsibilities in the agreement

A clause stating that ‘the franchisee is responsible for all licences’ is not enough to manage the process, even if you agree to bear the cost. Negotiate a schedule setting out both parties’ obligations, because some documents and information are held only by the franchisor.

The schedule should address four practical points:

• Responsibilities: Who submits applications, who supplies technical documents and who liaises with the relevant authorities?
• Deadlines: When must the franchisor deliver the documents, and how will late delivery affect the opening date?
• Changes: How will legally required changes be approved, and how will their costs be allocated?
• Inability to obtain a licence: What happens if the core activity is not permitted, or if the required changes materially affect the project’s viability?

Ask a lawyer to draft clear provisions for each scenario, rather than assuming that you have an automatic right to withdraw or receive compensation. Distinguish between delays caused by gaps in your own documentation, delays attributable to the franchisor and decisions beyond either party’s control. Also specify who will monitor renewals and regulatory changes throughout operation, not just at the opening stage.

The practical takeaway: Before committing to a franchise purchase, map out the activities and approvals, verify them with the relevant authorities, then link them to a contractual schedule covering responsibilities and costs. A brand’s success is no substitute for confirming that its model can be licensed for your business.