Buying a Franchise in the UAE: Check the Contracting Party and Signing Authority

You may negotiate with a team representing a well-known brand, only to find that the franchise agreement names a different company and that fees must be paid to a third party’s account. This does not automatically indicate a problem, but it warrants investigation before you pay. In the UAE franchise market, protecting your investment starts with knowing who is legally bound to you, who has authority to sign the agreement and who is responsible if promises are not kept.

Distinguish the brand name from the contracting company

The brand name on a commercial proposal is not necessarily the name of the party that will sign the agreement. One company within a group may handle marketing, another may enter into the contract, and a regional operator may provide support. What matters is that these roles are clear and that referring you from one company to another does not become a way to evade responsibility.

Before signing, request a set of documents identifying the contracting party, including:

• Its full legal name, legal form, registration number and registering authority.
• A current copy of its licence or registration document, depending on its country of incorporation.
• Its registered address and the address for serving contractual notices.
• Details of any related entities that will receive fees or fulfil key obligations.

Cross-check these details against the opening section of the agreement, the signature page, invoices and payment instructions. If different names appear, request a written explanation of each entity’s relationship to the agreement. An assurance from the sales representative that they all belong to the same group is not enough: group membership does not automatically make each company liable for the others’ debts.

Also verify registration details with the relevant authority rather than relying solely on documents supplied by an intermediary. If the company is incorporated abroad, use an adviser who can interpret its registration extract and assess its legal status and its representatives’ powers.

Make sure the signatory can bind the company

The person you negotiated with may be a regional director or business development manager, but a job title alone does not establish authority to enter into a franchise agreement. Ask what gives them that authority: the company’s constitutional documents, a resolution passed by the appropriate corporate body, or a valid power of attorney?

A lawyer should review the scope and duration of the authority and any restrictions on it. It may permit negotiation but not signing, require two signatories, or limit the value of commitments that can be approved. If a representative signs on behalf of a foreign company, check the requirements for their authority documents to be accepted and used in the UAE, according to the nature of the transaction.

Do not overlook the schedules. A document setting out additional obligations or changing fees may need proper authorisation just as the main agreement does. Keep the final agreement and its schedules together in one file, arrange for them to be signed in the agreed manner, and ensure any later amendments are properly documented and authorised.

These checks work both ways: make sure your own company is the intended contracting party and that its representative is authorised to sign. If you have not yet incorporated your company, do not assume that an agreement you sign personally will automatically transfer to it once it is established. Put the necessary legal arrangements in place before committing.

Assess the contracting party’s ability to deliver on its promises

A registered company and an authorised signatory do not, by themselves, establish that the agreed support can be delivered. Ask whether the company has the staff and resources to fulfil its obligations, or whether it relies entirely on other entities that are not named in the agreement.

Request financial information and documentation about service delivery arrangements proportionate to the size of your investment. This might include available financial statements, an explanation of which entity employs the support team, and references from franchisees who have dealt with the same legal entity, rather than simply the brand.

If delivery is shared between group companies, discuss expressly making the contracting party responsible for the performance of the entities it uses. If the company is newly established or has limited resources, ask your lawyer whether a guarantee from a financially stronger company would be worthwhile, and consider its limits and enforceability. Do not treat the group’s reputation as a substitute for a written commitment from it.

Make payments only on the basis of documented instructions from the contracting party. If you are asked to transfer money to a different entity, request a document establishing its authority to collect payment and confirming that the amount will count towards discharging your obligation. Independently verify any sudden change in bank details, and retain receipts linking each payment to the agreement and its purpose.

Understand the legal framework and document your findings

The UAE has no standalone legislation governing franchising, nor a specific registration system for franchise agreements generally or a mandatory disclosure document specifically for franchise sales. The relationship is governed by the relevant general rules, including laws on civil transactions, commercial transactions and intellectual property. The powers of companies and their representatives must be reviewed under the rules applicable to them.

Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies may apply to arrangements that meet its conditions and are registered as commercial agencies. Do not confuse checking a company’s registration with registering the relationship as a commercial agency: each serves a different purpose and has different consequences.

Request appropriate contractual assurances about the accuracy of the company’s details and the signatory’s authority, and specify how notice must be given if the name, address or responsible entity changes. Do not assume that the absence of franchise-specific disclosure requirements releases the parties from the consequences of misrepresentation or breach of their obligations.

Practical takeaway: Before signing or transferring funds, cross-check three identities: the company taking on the obligations, the person authorised to sign and the entity receiving the money. Any discrepancy requires a documented explanation and legal review, not a verbal assurance.