Buying a Franchise in the UAE: Clarifying Confidentiality Obligations Before You Sign

A franchisor may ask you to sign a confidentiality agreement before sharing operational details or introducing you to its team. This is understandable in franchising, but it is not just a formality: it may impose obligations that begin before you buy the business and continue even if you decide to walk away. The aim is not to reject confidentiality, but to establish which information is protected, who may review it and what you must do when negotiations or the relationship end.

Understand what the law protects and what the contract adds

The UAE has no comprehensive law specifically governing franchising, nor a uniform mandatory disclosure regime specifically for franchise sales. The relationship is governed by general contract, civil and commercial law, as well as intellectual property legislation. Commercial agency rules may also apply, depending on the nature of the relationship and its registration. Do not assume, therefore, that a confidentiality agreement is simply a standard form required by franchise regulations.

For confidential information in particular, Federal Law No. 11 of 2021 on the Regulation and Protection of Industrial Property Rights covers the protection of undisclosed information alongside other rights. Its implementing regulations, issued under Cabinet Resolution No. 6 of 2022, set out further details. Not every piece of information a franchisor labels confidential necessarily qualifies as a legally protected secret. Statutory protection depends on conditions including the information being secret, having commercial value because it is secret, and being subject to reasonable measures to preserve its secrecy.

The contract, however, may impose confidentiality obligations that go beyond that statutory protection. Ask a UAE lawyer to distinguish between your legal duty to protect secrets and the additional obligations you would accept under the contract. Do not treat every restriction in the confidentiality agreement as a right the law automatically grants the franchisor.

Clearly define protected information and exceptions

Review the definition before looking at the consequences of a breach. A phrase such as ‘all information relating to the brand in any form’ could cover operating recipes, financial reports, oral presentations and routine negotiation correspondence. Ask for a workable definition, with examples relevant to the business and a process for identifying confidential material, particularly information shared verbally in meetings without a written record.

Negotiate clear exceptions for information that:

• Becomes publicly available without you breaching the agreement.
• Was lawfully in your possession before you received it from the franchisor.
• Was lawfully obtained from another party that was not under an obligation to prevent its disclosure.
• Was developed independently by you without using the franchisor’s confidential information.

Keep evidence showing that an exception applies, such as dated correspondence or earlier working files. A written exception is less useful if you cannot later prove where the information came from.

Also define the permitted purpose: assessing the franchise opportunity, arranging finance and then operating the business if an agreement is signed. If the agreement permits evaluation only, do not assume it automatically allows you to use the material during operations. Ideally, the subsequent franchise agreement should explain how it relates to the earlier confidentiality agreement and which provisions prevail if they conflict.

Allow legitimate sharing with advisers and finance providers

Before buying, you will need to share information with a lawyer, an accountant and possibly a bank or co-investor. If the agreement prohibits disclosure to anyone without separate consent, it could hold up your viability assessment or finance application. Ask for permission to share information with specified categories of recipients on a need-to-know basis, subject to appropriate confidentiality arrangements.

Also ask about the limits of your liability for those recipients’ actions. Do not accept wording that automatically makes you responsible for anything done by anyone who has seen the information without understanding its scope and whether you can manage the risks. Distinguish between an employee under your supervision and an independent adviser or finance provider with its own procedures and obligations.

The wording should also permit disclosure required by law or ordered by a competent authority, with notice to the franchisor where legally permitted and disclosure limited to what is required. The notification obligation itself must not prevent you from fulfilling a legal duty.

It is also worth protecting your own information. You may provide details of funding sources, a site plan or private financial information. Negotiate an appropriate mutual obligation that prevents these materials from being used for purposes other than assessing the relationship, rather than protecting only the franchisor’s information.

Assess compliance costs and what happens if you withdraw

Turn the obligations into workable procedures: who can access the files? Where will they be stored? May they be emailed or stored using cloud services? Ask about security requirements before signing, then estimate the cost of implementing them and training staff. Do not promise a level of technical protection until you have checked that you can provide it.

Review the duration of the obligation according to the type of information. Genuine secrets may need protection for as long as they remain secret, while a fixed period may be negotiable for other materials exchanged during negotiations. Do not allow a restriction on using information to become a vague ban on drawing on your general professional experience.

If you withdraw, you may have to return or delete files and confirm this in writing. Negotiate a carefully defined exception for copies that must be retained by law and backups that cannot reasonably be deleted immediately, while continuing to protect them and not use them. Review any agreed compensation clause or obligation to cover investigation costs with your lawyer; do not assume that a stated amount automatically becomes payable in every case.

Practical takeaway: Before receiving sensitive files, agree in writing on the definition of confidential information, exceptions, permitted recipients and deletion procedures. A good agreement protects the franchisor’s know-how while giving you genuine scope to assess and finance the purchase.