Buying a Franchise in the UAE: Scrutinising Marketing Fund Fees

A marketing contribution may look like a minor item when buying a franchise in the UAE, but it is a recurring commitment that may continue even when your outlet does not benefit directly from campaigns. Across a franchise network, pooled spending can strengthen the brand, provided there is clarity about how money is collected and spent. This guide focuses on examining the marketing fund before signing, and on the rights you should negotiate rather than assume you have automatically.

1. Separate fund contributions from other advertising expenditure

Start by requesting a written list of all marketing obligations. The offer may combine a contribution to the brand’s fund, a minimum local advertising spend, a launch campaign and digital account management fees. These are separate costs: paying one does not necessarily fulfil the others.

Create a schedule for each fee showing who receives it, when it is payable, how it is calculated and whether it can change. If the contribution is a percentage of sales, ask for a precise definition of sales: are VAT and refunds excluded? How are discounts, delivery orders and platform commissions treated? Do not leave the answer to a general statement in the operations manual.

Also check whether there is a fixed minimum payment and whether it remains due during temporary closures or refurbishment. Ask an accountant familiar with the actual arrangement to explain the tax treatment of the fees and the invoicing requirements. Then calculate the total commitment under a low-sales scenario, not just an optimistic launch forecast.

2. Understand what the law provides and what the contract needs to provide

The UAE has no standalone federal law governing franchising as a distinct system, nor a franchise-specific pre-sale disclosure regime requiring a standard marketing fund disclosure document. Do not therefore assume that the franchisor is automatically obliged to provide the fund’s budget or an expenditure statement in your preferred format.

The relationship is subject to the general contract rules in the Civil Transactions Law and, depending on the nature of the dealings, Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law. Other legislation may apply depending on the business activity and arrangement. These rules are no substitute for an explicit clause giving you access and review rights. Equally, the absence of franchise-specific disclosure requirements does not permit fraud or misleading information.

Some arrangements may fall under Federal Law No. 3 of 2022 regulating commercial agencies if they meet its conditions and are registered accordingly. However, not every franchise agreement is a registered commercial agency, and there is no general obligation to register every franchise as one. Ask a UAE lawyer to establish the agreement’s status, and do not rely on outdated sources based on the repealed commercial agencies law.

3. Request evidence of how the money is managed before committing

Request summaries of actual expenditure and available budgets for previous periods, together with a sample of the report franchisees receive. The aim is not to obtain customer names or trade secrets, but to understand what proportion of the money goes towards campaigns, management fees, content production and external agencies.

Ask the franchisor specific questions:

• Who collects contributions, and who approves expenditure?
• Does the fund have a separate bank account, or are its finances kept separate only in the accounting records?
• Do franchisor-owned outlets contribute on a comparable basis?
• Are unused balances carried forward to the next period?
• Are fees paid to companies connected with the franchisor, and how are those fees reviewed?
• Does the fund pay for marketing products to customers, or also for recruiting new franchise buyers?

If the brand is new and has no track record, request an initial budget, a spending policy and a reporting timetable. A lack of history is not sufficient evidence of poor management, but it makes contractual safeguards more important. With the consent of those involved, speak to existing franchisees about the consistency of reporting, not just their overall satisfaction.

4. Turn transparency into enforceable rights

Negotiate an addendum setting out the fund’s purposes and permitted expenditure, including its management fees or how they are calculated. Ask for a clear distinction between spending that serves the brand’s network and the franchisor’s corporate costs or efforts to sell new franchises.

The addendum should specify how often reports will be issued, the deadlines for providing them, the level of detail and the process for requesting clarification. You can also agree on an independent review of the accounts, specifying who pays for it and when the cost shifts to the franchisor if material irregularities are found. These are suggested rights to negotiate, not automatic rights held by every franchisee.

Also review the franchisor’s power to increase contributions or amend the fund’s policy through the operations manual. Request a clear process for changes, advance notice and agreed limits. Specify a procedure for raising objections, correcting problems and resolving disputes; do not assume that an objection allows you to stop paying unilaterally without contractual consequences.

5. Assess local benefits without demanding a sales guarantee

The brand may benefit from a regional campaign without spending an amount equal to your contribution in your area. Distinguish, therefore, between your right to transparency over spending and a demand that the franchisor guarantee an advertising return or a particular level of sales.

Ask how markets and channels are selected, and how well the content and language suit customers in the UAE. If you are required to advertise locally, define the approval process, the response deadline and whether that spending counts towards your marketing obligation or is additional to it.

Practical takeaway: Do not sign until you have a comprehensive fee schedule, a clear spending policy, a sample report and a written process for review and objections. Anything you cannot understand or verify before buying may become a cost that is difficult to control afterwards.