Buying a Franchise in the UAE: Securing Your Right to Sell Later

You may buy a franchise intending to run it for many years, but your circumstances or investment strategy could change. In franchising, owning the equipment or the company does not necessarily mean you are free to transfer the right to use the brand to a new buyer. So examine the sale process before you buy: who must approve it, what conditions apply, how much will it cost, and when does your liability end? Understanding these details helps you assess the business’s saleability, not just its operating profits.

Distinguish between selling the business and transferring the franchise agreement

You can exit your investment by selling the business’s assets, selling shares in the company that operates it, or transferring contractual rights and obligations under an arrangement approved by the parties. These routes are not identical, and the franchise agreement may treat all of them as transfers requiring the franchisor’s consent.

Read the definitions of ‘transfer’ and ‘change of control’ carefully. Do they cover bringing in a partner, selling a minority stake or transferring shares to a company you own? Do not assume that keeping the same contracting company removes the need for consent. Equally, negotiate clear exceptions for internal restructuring that does not change effective control, with appropriate requirements for notification and evidence of continuity.

The UAE has no standalone federal franchise law, nor a general federal regime requiring a standardised disclosure document before a franchise purchase. The relationship is governed by the general rules of the Civil Transactions Law, the Commercial Transactions Law issued under Federal Decree-Law No. 50 of 2022, and other legislation applicable to the particular arrangement.

Where a relationship meets the requirements for a commercial agency and is registered as such, Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies must also be considered. Not every franchise is automatically a registered agency. Seek a review of the legal position before assuming that the contractual exit provisions are sufficient. The safeguards suggested here are points for negotiation, not automatic rights available to every franchisee.

Make franchisor consent a workable process

The franchisor may want to ensure that a new buyer can protect the brand and keep the business running. The problem is not simply the requirement for consent, but leaving the grounds for refusal and the response timescale open-ended. You could end up spending money on a transaction without knowing when a decision will be made.

Ask for written buyer eligibility criteria, such as financial standing, required experience and willingness to complete training. These criteria should be objectively assessable, and new requirements should not emerge after you put forward a suitable candidate except through an agreed process.

Negotiate a procedure that includes:

• A defined list of the information and documents required for a consent application.
• A deadline for confirming that the application is complete and requesting any missing items in a single consolidated request.
• A response period starting when the complete application is received.
• Written reasons for any refusal, and an opportunity to address shortcomings that can be remedied.
• An undertaking not to withhold or delay consent without a reasonable, specific justification.

Do not treat the franchisor’s silence as consent unless the agreement expressly provides for this and its enforceability has been reviewed. It is also useful to establish how a prospective buyer may access confidential operating information, with appropriate consent and confidentiality obligations, so they can assess the business without you breaching your existing agreement.

Calculate exit costs and examine any right of first refusal

The phrase ‘transfer fees in accordance with the franchisor’s policy’ gives you no clear basis for estimating your net sale proceeds. Ask for the fee, or the method for calculating it, to be specified. Establish whether it covers assessment of the buyer, documentation and training, and which additional expenses may be charged.

Also ask whether the sale is conditional on refurbishing the premises, replacing equipment or the buyer signing a new agreement. You might agree a suitable price with a buyer, only for them to seek a reduction because the new contractual terms or fit-out requirements differ from those on which their offer was based. Specify when these requirements must be disclosed, who bears the cost and how they affect completion.

If the agreement gives the franchisor a right of first refusal, ask for a precise explanation of how it works: what offer triggers the right? Which documents are required? How long does the franchisor have to exercise the right and complete the purchase? How will offers involving instalments or non-cash terms be compared?

Also negotiate what happens if the franchisor does not exercise its right, including how long you have to sell to the other buyer on the terms offered. Avoid wording that allows the transaction to be put on hold indefinitely or requires the entire process to restart because of a non-material amendment.

Link completion of the sale to the end of your liability

The franchisor’s approval of the buyer does not necessarily release you from past or future obligations. Ask for a clear document specifying the date on which responsibilities transfer, the sums due up to that date, and any obligations that remain with you and why.

If you have given a personal guarantee, do not assume it ends when you sell your shares. Make a written release, or a clear definition of any remaining obligations under the guarantee, a condition of completion. Coordinate this with any necessary consents from the landlord, lender and other parties: one party’s consent does not replace the others’.

Ask your lawyer to prepare a completion checklist covering consents, releases, payment arrangements and the operational handover. If the transaction involves transferring ownership of a commercial establishment, the relevant documentation, registration and publication requirements under the Commercial Transactions Law must also be addressed. The franchisor’s consent alone is not enough.

The practical takeaway: Before buying a franchise, ask for a written exit process covering consent criteria, deadlines, fees, rights of first refusal and release from liability. The business’s saleability starts with the agreement you sign when you first buy.