Buying a Franchise in the UAE: What Happens to Stock and Equipment When the Agreement Ends?

When buying a franchise in the UAE, it is easy to focus on opening costs and overlook what your assets will be worth when the relationship ends. Yet branded stock or bespoke equipment can turn from a saleable asset into a storage or removal expense. Protecting your franchise investment starts with agreeing what will happen to these assets before you buy, rather than negotiating after the doors have closed.

Separate ownership of assets from the right to use them

Paying for equipment or goods does not necessarily mean you can continue using them under the brand once the franchise agreement ends. You might own a machine outright while the licence for its operating software expires, or own printed packaging that the agreement prohibits you from using or selling once the trade mark licence ends. A general clause such as ‘all branding must be removed’ is therefore not enough.

Ask for a list of the expected assets, divided into:

• Generic stock that can be sold without any association with the brand.
• Products, packaging and clothing bearing the brand or protected designs.
• Equipment you own that can be reused or sold.
• Equipment leased or loaned by the franchisor or supplier.
• Devices that rely on software or accounts that will cease to be available when the relationship ends.

For each category, record the owner, proof of ownership, restrictions on disposal, and who will pay for transport or storage. If equipment is financed, check the lender’s terms before committing to transfer ownership to the franchisor: your contractual obligation to the franchisor does not override the lender’s rights.

Understand what the law determines and what needs to be agreed

The UAE has no standalone federal franchise law, nor a franchise-specific pre-sale disclosure regime requiring a standard disclosure document. Depending on its nature, the relationship is governed by civil and commercial transactions rules, intellectual property law and other relevant legislation. Do not therefore assume that the franchisor is automatically obliged to buy back your stock or reimburse your full fit-out costs.

Relevant legislation includes Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law and Federal Decree-Law No. 36 of 2021 on Trade Marks. Ownership of goods or equipment is separate from the right to use the associated trade mark, so continued sales under the brand after the relationship ends require a clear legal and contractual basis.

If the arrangement meets the requirements for a registered commercial agency, Federal Law No. 3 of 2022 Regulating Commercial Agencies may apply, making it necessary to examine its provisions on termination and assets. A franchise agreement does not become a registered agency simply because it is described as one.

Similarly, if the settlement goes beyond selling individual items of equipment and involves transferring ownership of the commercial business itself, statutory requirements for notarisation or attestation, registration and publication may apply. Ask a lawyer to establish the nature of the transaction before relying on a brief handover form, rather than treating these different situations as a single procedure.

Negotiate a clear buyback mechanism, not a vague promise

A clause stating that ‘the franchisor may purchase the stock’ gives the franchisor an option, but gives you no guarantee of recovering your money. First establish whether the buyback is mandatory or optional, and the deadline for exercising any option. If the franchisor declines to buy, the agreement should explain what alternatives are available to you without infringing trade mark rights.

A written schedule should address the following:

• Eligible assets: Does the buyback cover only saleable products, or also packaging and equipment? What requirements apply to remaining shelf life and packaging condition?
• Purchase price: Will it be based on documented purchase cost, market value or an agreed depreciation formula?
• Inspection and stocktake: Who will carry these out, how will the condition of assets be documented, and how can you challenge exclusions?
• Payment and delivery: When is payment due, who pays for shipping and insurance, and when does the risk of damage transfer?
• Valuation disputes: Will an independent valuer be appointed, how will they be selected, and how will their fees be shared?

Pay attention to set-off rights too. If the agreement allows the franchisor to deduct amounts owed to it from the stock purchase price, negotiate an itemised statement of deductions and a process for challenging disputed amounts, rather than leaving the entire payment in limbo.

Also test how the outcome differs between expiry, non-renewal and termination following a breach by either party. A single clause covering every scenario could leave you bearing a loss even when the franchisor is responsible for the relationship ending.

Calculate exit costs before deciding to buy

Prepare a separate end-of-agreement budget covering sign removal, debranding equipment, transporting assets, storage and lawful disposal of anything that cannot be sold. Do not assume that an asset’s purchase cost equals its recoverable value: a fit-out designed for one brand may be of limited use to another buyer.

If the franchisor proposes a stock sell-off period, document its duration, the products covered and the conditions for using the brand during that period. Specify which fees will continue, what support will be available and how returns will be handled. This period is not an automatic entitlement, nor does it permit the sale of expired products or non-compliance with regulatory requirements.

Compare shortlisted brands on the basis of these answers, not just their initial franchise fees. Ask for a practical example of how a previous asset settlement was handled, rather than accepting assurances that matters will be resolved amicably.

The practical takeaway: Before signing, attach a schedule to the agreement setting out what will happen to each category of assets, their price or valuation method, and the deadlines for payment and removal. Any value you cannot reliably recover should be factored into the investment risk from the outset.