Buying a Franchise in the UAE: Will It Be Registered as a Commercial Agency?

When entering the UAE franchise market, it is not enough to ask about the strength of the brand and the cost of opening the business. You should also ask: will your relationship with the franchisor be registered as a commercial agency, or will it remain an unregistered contractual relationship? This distinction is more than an administrative formality: it affects the rules governing the relationship and the protections available to you. It should therefore be settled before you buy the franchise, not after you have paid the fees or started trading.

1. Understand the difference between a franchise agreement and a registered agency

The UAE has no standalone federal law governing franchising alone, nor a general federal system requiring all franchise agreements to be registered as franchise agreements. Unregistered relationships are subject to the general rules governing contracts and civil and commercial transactions, including the Commercial Transactions Law issued under Federal Decree-Law No. 50 of 2022, alongside trademark and competition legislation and business licensing requirements.

A relationship that meets the requirements and is entered in the Commercial Agencies Register, however, is governed by Federal Law No. 3 of 2022 Regulating Commercial Agencies. This replaced the former Commercial Agencies Law, No. 18 of 1981, so do not rely on an old explanation of agents’ rights without checking the current position.

The title of the agreement does not determine its legal status. The words ‘agent’ or ‘exclusive franchise’ in a document do not prove that it is registered. Equally, a franchise agreement is not automatically invalid simply because it is not registered as a commercial agency. You need to establish its actual legal classification, whether it meets the registration requirements and whether registration has in fact been completed.

2. Check your entity’s eligibility before choosing a route

Do not assume that any company licensed to operate a shop or restaurant can register as a commercial agent. Eligibility to carry on a business activity and eligibility for entry in the Commercial Agencies Register are separate matters, each with its own requirements.

Registration is subject to conditions relating to the agent’s status, the entity’s ownership, and the nature and scope of the relationship. Eligible categories under the legal framework include UAE nationals, companies wholly owned by UAE nationals, and specified categories of joint-stock companies and their subsidiaries. There are also provisions and exceptions whose applicability must be checked. Do not reduce these rules to a blanket statement such as ‘a certain percentage of local ownership is enough’ for every type of company.

Before setting up the entity or changing its ownership, ask a UAE lawyer to review:

• The company’s legal form, shareholder details and ownership chain.
• Its licensed activity and the authority that issued the licence.
• The identity of the party granting the rights and its role in the relationship.
• The products or services and geographical territory proposed for registration.
• Any activity-specific requirements or relevant exceptions.

What you need is not a verbal assurance that registration is possible, but a written assessment setting out eligibility, the steps required and potential obstacles.

3. Ask for proof of registration and a clear plan for completing it

If the franchisor says the relationship will be ‘registered’, ask: registered where, and in what capacity? A trade licence, trademark registration and authentication of signatures on the agreement are not substitutes for entry in the Commercial Agencies Register held by the relevant ministry.

Where registration already exists, request an up-to-date extract or certificate and check that its details match the transaction. Review the names of the agent and principal, the products or services covered, the territory and the registration status. If you are buying an existing business, do not assume that buying its assets automatically transfers the agent’s status or registration to you.

If registration is to take place later, request a list of the documents and procedures required. The process requires a written, notarised agreement, either in Arabic or accompanied by an Arabic translation, together with compliance with the relevant authority’s requirements. Agree in writing which party is responsible for the application, who will bear the costs of translation, notarisation and review, and how both parties will co-operate to resolve any outstanding requirements.

Also make explicit provision for the possibility that the application is rejected: will the agreement continue unregistered, will it be renegotiated, or will either party have the right to terminate the arrangement? Do not leave this outcome dependent on an unwritten understanding.

4. Compare the effects of both routes without assuming absolute protection

Registration can provide additional statutory protection, particularly in relation to termination, non-renewal and compensation. It does not, however, make the relationship permanent or guarantee automatic compensation in every case. The application of these rights depends on the statutory conditions, the facts of the relationship and the procedures followed.

If you take the unregistered route, do not assume that you enjoy the special protections afforded to registered agencies simply because you operate a well-known brand. The drafting of contractual rights and obligations, and the general rules applicable to the agreement, become especially important.

Ask for a written comparison of the two routes tailored to your business, rather than a list of theoretical advantages. It should explain how your legal position would change, what additional obligations would arise, what the procedural costs would be, and how later changes to shareholders or a company restructuring could affect eligibility for registration. Include procedural costs and legal advice in your purchase budget, without treating registration as a guarantee of profitability or financing.

5. Compile an approval file before buying

Before signing the final agreement, bring together three elements: an assessment of the entity’s eligibility, proof of registration or a plan for completing it, and a version of the agreement that clearly reflects the chosen route. Make sure the description of the transaction in the commercial proposal matches these documents, and that the person responsible for the investment understands the difference between an operating licence and registration as a commercial agency.

The practical takeaway: do not buy a franchise on the strength of a promise that it is ‘protected as an agency’. Establish the status of the relationship, check your company’s eligibility and document what happens if registration cannot be completed. Then base your purchase decision on rights you can verify.