Buying a Franchise in the UAE: Who Sets Prices and Discounts?

The brand may look right and the opening budget seem reasonable, only for you to discover that a compulsory discount campaign changes the viability of your business. When buying a franchise in the UAE, knowing the current price list is not enough: you need to understand who can change it, who pays for promotions and how far your obligation to participate extends. Within a franchise network, clarity over these responsibilities protects the relationship between franchisor and franchisee, not just the profit margin.

Why review pricing authority before choosing a brand?

A franchisor may present a standard price list as part of a consistent customer experience. But the phrase ‘brand prices’ does not, on its own, tell you whether those prices are recommended, mandatory or maximum prices. Nor does it reveal whether you can adjust them to suit your location. Ask for a written explanation of each term, then compare it with the contract, operations manual and point-of-sale system settings.

Start with four practical questions:

• Can you change the price of a product or service without prior approval?
• Do prices differ between in-store purchases, direct orders and delivery platforms?
• Can the franchisor launch a UAE-wide promotion that automatically includes your outlet?
• Are there penalties or a loss of benefits if you do not follow a recommended price?

The last question matters: a price may be ‘recommended’ on paper but effectively compulsory because of threatened penalties or disabled editing permissions. Ask for a system demonstration and speak to existing franchisees about how price differences are managed in practice. Do not rely solely on the salesperson’s description.

What is the legal framework for pricing in the UAE?

The UAE has no standalone federal legislation governing franchising as a distinct contractual category, nor a mandatory disclosure regime specifically for franchise sales. The relationship is generally governed by the Civil Transactions Law, the Commercial Transactions Law and other relevant legislation, including intellectual property, competition and consumer protection laws. This makes the wording of contractual pricing powers particularly important.

Federal Decree-Law No. 36 of 2023 on the Regulation of Competition is the main framework to consider when assessing pricing arrangements. Agreements that restrict competition, including some forms of resale price maintenance, may raise legal concerns. Do not assume that a consistent brand identity automatically justifies imposing a minimum resale price, or that calling a price ‘suggested’ is enough if the mechanisms used to enforce it are binding.

Equally, not every instance of price coordination or joint promotion is automatically a breach. An assessment must consider the nature of the arrangement, the scope of the law and any relevant exemptions. Ask a UAE lawyer to review both the clause and how it is implemented, rather than relying on a general statement about compliance.

If the relationship is registered as a commercial agency, Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies may also apply. Do not treat registration as an automatic consequence of a franchise agreement, or as a blanket exemption from reviewing pricing terms. The agreement’s specific legal status needs to be assessed.

Calculate the promotion’s impact on each order

Ask for real examples of previous campaigns, showing their duration, the products included and who funded the discount. These are documents to request as part of your commercial due diligence, not a specific disclosure form required of all franchisors under a UAE franchise law.

Create a spreadsheet for each proposed campaign. Start with the revenue per order after the discount, accounting separately for VAT where applicable. Then deduct the cost of the product, packaging, platform commission, payment processing fees and any sales-related fees under your contract. The result is the order’s contribution towards fixed costs, not net profit.

Compare a normal sale with a promotion you fund entirely, then with one jointly funded by the franchisor. Also test what happens when an app voucher is used alongside a list-price discount and loyalty rewards. Each offer may be acceptable on its own, while combining them leaves the order making little contribution or generating a loss.

Pay attention to reimbursement timing: if the franchisor promises to repay its share later, you will need cash to fund the gap until settlement. Ask about the documents needed to claim reimbursement, payment dates and the treatment of returns and cancellations. Do not treat higher order volumes as sufficient evidence that a campaign has succeeded.

Put the agreement into a clear contractual addendum

Negotiate an addendum setting out procedures for approving prices and promotions, subject to applicable law, rather than leaving them to a vague phrase such as ‘participation in all campaigns’. The addendum should clarify:

• The status of published prices and the limits of each party’s authority to change them.
• How you will be notified of campaigns, and how much time you will have to assess their cost and prepare stock.
• How the cost of discounts, vouchers, loyalty points and free products will be shared.
• The rules for combining offers and the sales channels to which they apply.
• The process for requesting a justified exemption and reviewing campaigns that cause operating losses.
• The documents required for settlement and deadlines for paying the franchisor’s contribution.

Also clarify the relationship between the contract and the operations manual: can an amendment to the manual create a new financial obligation or change pricing powers? Ask for limits on this authority and specify which document takes precedence if they conflict. This is a suggested contractual safeguard to negotiate, not a standard legal right that every franchisee automatically enjoys.

The practical takeaway: Before signing, run the numbers for a complete campaign, check pricing permissions in the system, and document who bears the costs and who makes the decisions in the contract. Choose a brand that can clearly explain the economics of its promotions, not one that simply promises discounts will increase sales.