Buying a Franchise in the UAE: Controlling Mandatory Refurbishment Costs

The budget for buying a franchise may look manageable until a request arrives to change the interior or replace equipment that still works perfectly well. In the UAE franchise market, refreshing a brand’s identity and customer experience helps it stay competitive, but it can also leave franchisees facing an unexpected investment. So look beyond the opening costs: before signing, check who can require an upgrade, when they can do so, and what financial and contractual safeguards apply.

What allows a franchisor to require new spending?

Start by gathering the franchise agreement, its schedules, the operations manual, and the design and fit-out specifications. Look for phrases such as ‘keeping pace with the latest brand standards’ and ‘implementing changes specified by the franchisor’. This wording may allow the franchisor to demand extensive work, even if the agreement has no clause specifically headed ‘refurbishment’.

Ask for the scope of any upgrade to be defined in writing. Does it cover only the shopfront and furniture, or also ordering terminals, payment systems, kitchen equipment and air conditioning? Does it apply only to your outlet, or form part of a network-wide upgrade programme? Also distinguish between repairing a damaged asset and replacing a functioning one because of a rebrand. The reason for the work affects the cost-sharing arrangements and implementation period you should negotiate.

Check the order of precedence between the documents. If the agreement allows the franchisor to amend the operations manual unilaterally, request wording confirming that changes requiring capital expenditure remain subject to the agreement’s safeguards. Issuing a new version of the manual should not override them.

What protection does UAE law provide?

The UAE has no standalone federal law regulating franchising as a distinct category of contract, nor a franchise-specific federal disclosure regime requiring a standard document to be supplied before a contract is signed. Do not assume, therefore, that the franchisor is automatically obliged to provide a comprehensive schedule of future refurbishments. Request this information and put the agreed obligations in writing.

Relationships that are not registered as commercial agencies are subject to general rules, including the Civil Transactions Law and the Commercial Transactions Law issued under Federal Decree-Law No. 50 of 2022. Principles of good faith and mandatory legal rules remain relevant, but should not be treated as substitutes for clearly drafted limits on the power to require upgrades.

Arrangements that meet the eligibility requirements and are registered as commercial agencies fall under Federal Law No. 3 of 2022 Regulating Commercial Agencies. Signing a franchise agreement alone does not confer that status. Ask a lawyer to establish the status of your relationship and identify the local rules, licensing requirements, building regulations and safety requirements relevant to the premises. The franchisor’s approval of a design does not replace approvals from the relevant authorities or the landlord.

Ask for cost evidence before choosing a brand

Rather than asking simply, ‘How much does a refurbishment cost?’, request a pack detailing the brand’s most recent upgrades at comparable locations. It should explain the work involved, why it was required, how long the outlet was closed, and the actual cost compared with the initial estimate. Anonymised data can be supplied where confidentiality is a concern.

With the relevant parties’ consent, speak to franchisees who have been through the process. Ask what costs arose outside the contractor’s quotation: design fees, removal of existing fixtures and fittings, storage, retesting, permits and staff training on new equipment. This is not a review of the brand’s profitability, but a test of how complete the refurbishment budget is.

Also request a written statement of any planned changes to the brand identity or equipment that the brand’s management knows about at the time of signing. If a reliable estimate cannot be provided, record that as a risk in your purchase decision. Do not treat missing information as evidence that no costs are on the horizon.

Negotiate workable safeguards

The aim is not to freeze brand standards, but to make the obligation predictable and affordable. Discuss including the following safeguards in a separate schedule:

• Defined scope: Specify which works count as capital upgrades and distinguish them from routine maintenance.
• Clear timing: Set a notice period that allows time to obtain quotations and permits and arrange funding, with separate provisions for urgent safety work.
• Limits on frequency: Define when another full refurbishment can be required and which exceptions are acceptable.
• An agreed financial limit: Set a cap or a special approval process if costs exceed a specified threshold, making clear which items count towards it.
• A challenge procedure: Provide for a review of quotations or the appointment of an independent expert if there is disagreement over the need for the work or its scope.

Also address refurbishment requests made towards the end of the contract term. Will the work be deferred, reduced in scope or partly funded by the franchisor? Do not assume there is an automatic right to compensation for investment you have not recouped. Ask for protection against being treated as automatically in breach while a documented request is being reviewed under the agreed procedure, except where urgent legal or regulatory requirements demand action.

Stress-test cash flow during the work and closure

Create a separate refurbishment budget rather than combining it with day-to-day maintenance. Include the cost of the work, applicable taxes, professional fees and approval costs. Then add the expenses that continue during closure, such as rent, salaries and loan repayments. Test the impact of a delayed reopening too, without assuming that every new investment will generate additional sales.

If you need finance, check the drawdown conditions, security requirements and repayment schedule before agreeing to the programme of works. A lender may require invoices or a contribution from your own funds, while the contractor may demand payments upfront. That is a cash-flow gap to resolve in advance. Ask the franchisor about any contribution or deferral of specific fees during closure, and document the response rather than relying on a verbal promise.

The practical takeaway: Before buying a franchise, secure three things: a record of previous upgrades, a budget that covers the closure period, and a contractual schedule governing the power to require spending. If these remain unresolved, the true cost of joining the network is not yet clear.