Buying a Franchise in the UAE: Protecting Your Payments Before Site Approval

You may find the right brand, only for the franchise deal to stall because the site fails to secure approval or the fit-out costs exceed your available funding. When entering the UAE franchise market, assessing the brand is not enough: you also need to establish exactly when your payments and commitments become binding and non-refundable. This guide focuses on linking franchise fees to site approval, the lease and licensing, so you do not pay for a business you cannot open.

1. Understand the legal protections and their limits

The UAE has no standalone federal law governing franchising alone, nor a franchise-specific mandatory disclosure regime requiring a standard pre-sale document or a set waiting period. Do not therefore assume that the law automatically gives you a cooling-off period or the right to recover a reservation fee simply because you cannot find a site.

Depending on its nature, the relationship is subject to the general provisions of the Civil Transactions Law and the Commercial Transactions Law, issued under Federal Decree-Law No. 50 of 2022. Federal Decree-Law No. 36 of 2021 on Trade Marks governs trade mark rights and licensing. Relevant licensing requirements and local property rules for the site and business activity also apply.

Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies may apply if the relationship meets its requirements and is registered accordingly; not every franchise agreement is automatically a registered commercial agency. Ask a lawyer to establish the agreement’s status before assuming that special protections apply on termination or in a dispute.

As part of its standard contracts project, the Ministry of Economy and Tourism provides a draft restaurant franchise agreement linking the parties’ obligations to securing ownership of, or the right to lease, an approved site and fitting it out to the franchisor’s requirements. This is a useful negotiating reference, but it is neither a franchise-specific law nor a guarantee of a refund under your own agreement.

2. Distinguish brand approval from site suitability

The franchisor’s approval means that the site meets its commercial and operational standards. It does not replace approval from the landlord or the relevant authorities. Premises may appear suitable in terms of floor area and frontage, yet the building’s requirements may prevent the proposed activity or increase fit-out costs.

Before making a non-refundable payment, request a site information pack covering:

• The permitted business activity and whether the necessary licence and approvals can be obtained for that emirate and activity.
• Electricity, ventilation, drainage and safety requirements, along with any proposed structural alterations.
• The landlord’s approval for the fit-out, signage and intended use, following the required procedures.
• The franchisor’s written standards for floor area, layout and frontage, and how long its approval remains valid.
• An initial fit-out estimate based on a technical site inspection, rather than averages from other outlets.

Specify who is responsible for each step and who pays for it. A statement that ‘the franchisee is responsible for all approvals’ does not clarify whether the franchisor must supply plans and specifications in time for those approvals to be obtained.

3. Link payments to clear, verifiable conditions

Ask for the contract to distinguish between signing the agreement and fees becoming unconditionally payable. You can negotiate conditions precedent that determine when the obligation to proceed begins or when a payment becomes non-refundable. It is not enough to say that the project is ‘subject to site approval’ without explaining what happens if approval is not obtained.

Conditions might include written approval from the franchisor, a signed lease permitting the intended activity, receipt of specified approvals, finance being secured if needed, and fit-out costs staying within an agreed budget. Each condition should be verifiable through clear documentation, rather than left to either party’s vague assessment.

For each payment, record five points: its purpose, its due date, who receives it, whether and when it is refundable, and any permitted deductions. If the franchisor wants to deduct site assessment costs, negotiate a requirement for your prior approval, supporting evidence and a cap on those costs.

Also set a deadline for satisfying the conditions, a process for extending it by written agreement, and a time limit for returning any sums due. Distinguish between approval being unobtainable despite a complete application and your failure to provide the required documents. These different causes should have clearly defined contractual consequences.

4. Align the franchise agreement with the lease and finance arrangements

The franchise agreement may protect you from losing fees while leaving you committed to a long lease or an equipment order. Review all three commitments together: the franchise agreement, the lease and the finance agreement. The franchisor’s consent to your withdrawal does not bind the landlord or the bank unless their agreements provide for it.

Where the other party is willing, negotiate consistent terms covering a failure to obtain a licence or rejection of the site. Specify the lease commencement date, the fit-out period and when funding will be released. Do not treat finance approval in principle as a guarantee that funds will be available: check its conditions, the security required and its expiry date.

Prepare a pre-opening budget covering deposits, consultancy, approvals, design, fit-out, initial stock and the cost of delays. Then test a scenario in which the business never opens: which sums are refundable? Which obligations remain in force? Who owns the equipment and designs already paid for?

Before transferring any money, bring these answers together in a signed schedule and specify which documents take precedence if they conflict with the agreement or reservation letter. Have a local lawyer review the wording, particularly the termination and dispute resolution provisions.

The practical takeaway: Do not make non-refundable payments on the strength of a promise about a site. Link every payment to a documented condition, a specified deadline and a clear outcome if things go wrong, and review your commitments to the franchisor, landlord and lender together.