Buying a Franchise in the UAE: Who Handles Customer Complaints and Pays Compensation?

Customers may buy because they trust the brand, but they will return to your outlet when something goes wrong with a product or service. Before entering the UAE franchise market, ask more than how complaints are handled: find out who has the authority to decide on a remedy, who pays for it, and how you recover your costs if the cause was beyond your control. These details deserve a clear contract schedule, not a verbal promise of support.

Separate consumer rights from the internal allocation of responsibility

The UAE has no standalone federal law governing franchising, nor a mandatory disclosure regime specifically for franchise sales. The relationship is generally governed by civil transactions and commercial transactions laws, alongside other relevant legislation. Federal Law No. 3 of 2022 Regulating Commercial Agencies may apply where the relationship qualifies and is registered as a commercial agency.

Dealings with customers are also subject to Federal Law No. 15 of 2020 on Consumer Protection, as amended by Federal Decree-Law No. 5 of 2023. This framework protects consumers’ rights to safety, accurate information and fair compensation for harm, and imposes obligations on suppliers, including providing an invoice containing the required details.

A consumer contract or invoice must not include a clause exempting the supplier from its legal obligations. An agreement that the franchisor will bear the cost of a particular defect therefore does not remove your own obligations where you qualify as the supplier. Draft the arrangements as two separate processes: first, provide the customer with a remedy in accordance with the law; then settle the costs between the responsible parties without delaying that remedy.

Review the complaints record before choosing a brand

Request aggregated data that does not identify customers, covering a period representative of normal trading and key seasons. The aim is not to find a brand with no complaints, but to understand the types of problems, how often they occur and how effectively the system resolves them. You can request this information contractually without presenting it as a mandatory franchise-specific disclosure requirement.

Focus on five questions:

• What are the most common reasons for refunds or having to provide a service again?
• Do problems arise from the product, operating instructions or delivery at outlet level?
• Who approves compensation, and how long does approval take in practice?
• Do outlet owners bear the cost of central system errors or marketing promises?
• How are claims settled between the outlet, the franchisor and the supplier?

Ask for examples of closed complaint files with personal data removed, and compare them with what existing franchisees tell you. A written policy is not enough if, in practice, the outlet always pays first and then waits indefinitely for reimbursement. Include expected remedial costs in your feasibility assessment rather than treating them as exceptional, one-off expenses.

Turn responsibility into a workable table

Propose a contract schedule linking each type of incident to the party responsible for handling it, the party bearing the cost and the documents needed for settlement. Avoid a blanket clause such as “the franchisee is responsible for all customer claims” that makes no distinction between the sources of the error.

The table could cover staff errors within the outlet, defects in supplied products, errors in service descriptions approved by the franchisor, and failures in the central ordering system. Do not assume the franchisor is automatically responsible for an independent supplier. Specify which party you will pursue and whether the franchisor must assist you or indemnify you in agreed circumstances.

For example, if the outlet receives a defective product and the defect was not caused by its storage or handling, the agreement should explain how this is to be established and who bears the costs of replacement, transport and refunds. Where more than one party is at fault, provide a mechanism for allocating costs rather than leaving the matter unresolved until everyone agrees.

Also define which costs are recoverable: do they include inspections, expert fees and legal defence costs, or only the price of the goods? Review any liability limits and exceptions with a lawyer, and do not assume that a contractual indemnity covers every claim or penalty.

Give the outlet authority to act and document cost recovery

Requiring central approval for every small refund can make complaints slower and more expensive to resolve. Negotiate clear operational authority for the outlet, with an urgent process for safety-related cases and deadlines for escalation and financial settlement. These are suggested contractual arrangements, not uniform statutory deadlines for franchises.

Specify who communicates with the customer and the relevant authority, and who retains the invoice, order details and inspection evidence. If the franchisor takes over the defence of a claim, seek rights to access information and participate, and require your consent to any settlement that imposes additional obligations on you.

Review the actual insurance policies, not just the contractual requirement to have insurance. Check the scope of cover, exclusions, excesses and notification procedures: having a policy does not mean that every refund or voluntary goodwill payment is covered.

Before signing, test the schedule against a hypothetical complaint: a customer requests a refund because of a central error, and the outlet needs to act immediately. If you cannot identify who decides, who pays first and how those costs are recovered, the drafting is not yet complete.

Practical takeaway: Protect the customer with a prompt, legally compliant response, and protect your business with a written mechanism for allocating responsibility and recovering costs. Do not make the resolution of a complaint dependent on a financial dispute between you and the franchisor.