Buying a Franchise in the UAE: Keeping Your Fit-Out Budget Under Control

The franchise fee may seem clear, while the cost of turning premises into a fully operational outlet remains uncertain. In the UAE franchise market, an overall fit-out estimate is not enough: you need to know what it includes, who approves the design and who pays if requirements change. This guide focuses on fitting out your first outlet, from defining the scope of works to handover, rather than subsequent refurbishments.

1. Turn brand requirements into a scope of works that can be priced

Before comparing brands, ask each franchisor for a fit-out package specific to the outlet format you intend to buy. Branch photographs and a short equipment list are not enough to assess your financial commitment. An outlet in a shopping centre may have a different budget from a standalone unit, even if the floor area and visual identity are identical.

A practical package includes reference drawings, finish specifications, an equipment list with capacities, electricity, water and ventilation requirements, and shopfront and signage works. Ask for a clear statement of which elements are mandatory and which may be replaced with approved local alternatives.

Set out responsibilities in a table attached to the contract:

• Works provided by the landlord as part of the unit handover.
• Works carried out by your contractor and subject to the franchisor’s approval.
• Equipment or services sold separately by the franchisor.
• Designs, inspections and approvals requiring consultants or other bodies.

Then obtain quotations based on the same scope, with exclusions clearly stated. The phrase ‘complete fit-out’ does not establish whether the price includes connecting equipment, testing it or addressing inadequate building services within the unit. If the site has not yet been inspected, treat the estimate as preliminary and identify its underlying assumptions rather than treating it as a final price.

2. Understand the legal status of fit-out requirements

The UAE has no standalone federal franchise law prescribing a standard disclosure document or a general cap on fit-out costs. Depending on its nature, the relationship is governed by general contract rules under the Civil Transactions Law, the Commercial Transactions Law and trade mark legislation, alongside relevant local licensing, building and safety requirements.

The arrangement may fall within Federal Law No. 3 of 2022 Regulating Commercial Agencies if it meets the conditions for that law to apply and for registration. Do not assume that simply calling a contract a ‘franchise agreement’ gives you the protection of a registered commercial agency.

The draft ‘Restaurant Franchise Agreement’ available from the Ministry of Economy and Tourism illustrates the practical importance of this point: it links the parties’ obligations to obtaining ownership or leasehold rights over the approved site and carrying out the fit-out in accordance with the franchisor’s requirements. However, it is a draft contract, not a law imposing its terms on all buyers.

The implication is that the franchisor’s design approval does not replace approvals from the relevant authorities or the landlord. Equally, obtaining official approvals does not automatically mean the franchisor will accept the standard of finish. Ask your lawyer to distinguish between these two approval processes and specify the consequences of delays or refusals in each, rather than grouping them under a vague phrase such as ‘all necessary approvals’.

3. Put a written process in place to prevent cost escalation

The risk is not just a higher price, but being required to make changes after you have contracted with the builder. Before signing, negotiate approval of a dated version of the fit-out drawings and specifications, along with a clear order of precedence if the drawings, equipment list and contract conflict.

Ask for any subsequent change to follow a written procedure setting out:

• The reason for the change and whether it is required by an authority or requested by the franchisor.
• Its effect on the price, programme and work already completed.
• The party responsible for the cost, based on the agreed cause and allocation of responsibility.
• The person authorised to approve it before work begins.

Do not assume that the franchisor is legally obliged to pay for every alteration it requests; cost allocation requires an explicit agreement. One negotiating option is for each party to bear the cost of changes arising from errors in its own documents, with separate provisions for unforeseen official requirements.

Build your budget around separate items: design, works, equipment, transport and installation, testing, supervision fees and costs excluded from contractors’ quotations. Set aside a contingency appropriate to the condition of the premises, taking professional advice rather than choosing an arbitrary percentage. If you are financing the fit-out, align funding drawdowns with contractor payment dates: finance approval does not necessarily mean cash will be available when each payment falls due.

4. Link approval and handover to verifiable criteria

A phrase such as ‘fit-out to the franchisor’s satisfaction’ leaves considerable room for disagreement. Instead, request specific acceptance criteria, deadlines for reviewing drawings and responding to material approval requests, and a list of documents required at each stage. Define an escalation process for delayed responses, without treating silence as automatic approval unless this is clearly agreed.

At handover, distinguish between defects that prevent operation and minor snagging items that can be rectified later. Document equipment test results, warranties, as-built drawings and maintenance instructions, and specify who will follow up defect rectification with the contractor. Do not let the franchisor’s handover sign-off replace the contractual obligations and warranties the contractor should provide to you.

The practical takeaway: Before committing to a brand, bring together three connected documents: a fit-out scope that can be priced, a responsibility matrix covering approvals and costs, and a written procedure for changes and handover. This will make your assessment of the cost of entering the franchise market more realistic and less dependent on verbal estimates.