Franchise agreements in the UAE: dispute highlights exclusivity and agency risks

A legal article published by Forbes Russia on 16 October 2026 highlighted a dispute faced by a Russian coffee brand after entering Dubai through franchising. The case, recounted by Alexandra Kurdyumova, a partner at BGP Litigation, illustrates how exclusivity and registration as a commercial agency can affect expansion plans in the UAE when their implications are not considered from the outset.

A Dubai outlet with UAE-wide exclusivity

According to Kurdyumova’s account, an Emirati partner opened an outlet for a Russian coffee brand in Dubai and received exclusive rights covering the entire UAE under the agreement. The partner also asked for the contract to be entered in the Commercial Agencies Register, citing the need to reassure the bank and landlord. The Russian brand treated registration as a formality.

Two years later, an investor came forward who was willing to open several outlets in Abu Dhabi and Sharjah. The brand tried to negotiate an end to its relationship with the original partner, but the partner refused and demanded an extension of the contract. The author says that registration as a commercial agency made termination subject to requirements involving the agent’s consent or a determination of compensation.

She adds that the partner’s ability to obstruct imports of branded products during the dispute affected the prospects of opening the new outlets. After assessing how long proceedings might take, the investor withdrew from the project. The article did not name the brand, partner or investor, so these details remain a professional account of a specific case, rather than a statement from the parties involved.

Ending the relationship took more than a year

According to the author, the dispute ultimately resulted in the brand being able to terminate its relationship with the original partner on the grounds of prolonged failure to meet the purchasing plan. Reaching that outcome, however, took more than a year and required recourse to the UAE’s Federal Supreme Court.

Kurdyumova says the cost of ending the relationship exceeded the initial franchise fee the brand had received from the partner. She gives no specific figure, but the comparison makes clear that the cost of exiting the agreement was not a minor consideration for the brand owner.

The case combines two distinct consequences: the cost of resolving the existing relationship and the loss of an expansion opportunity that a new investor had been ready to finance. The lesson therefore extends beyond the wording of the termination clause. It also concerns the scope of the rights granted to the partner, how far their continuation depends on performance, and the brand’s freedom to bring in other partners.

Agency registration is not just an administrative step

Kurdyumova explains that franchise relationships in the UAE may overlap with commercial agency rules, and that this requires legal scrutiny before an agreement is signed or registered. She presents the case as a warning to brands that view registration as an administrative step with no effect on the balance of the relationship.

The article does not announce any new regulatory change in the UAE. Nor is this case alone enough to conclude that every franchise agreement is subject to the same rules, or that every partner has the powers described in the account. The author’s point is that parties need to understand the legal classification of their relationship, rather than relying solely on the label they give their contract.

For the franchise sector, the scope of exclusivity is particularly significant here: the outlet opened in Dubai, but the rights extended across the UAE. When the opportunity in Abu Dhabi and Sharjah arose, the new plan could not be treated separately from the original agreement. This is worth examining during negotiations: which territories are covered, what obligations apply in return, and what happens if the development plan is not delivered?

Performance targets and a clear dispute resolution mechanism

Kurdyumova recommends setting clear performance targets for the partner, including the number of outlets to be opened and purchasing volumes, while specifying how failure to meet them affects the continuation of the contract. In the case she describes, failure to meet the purchasing plan was a factor that ultimately enabled termination.

She also recommends paying attention to intellectual property rights, adapting the agreement to local rules, and including an international arbitration clause in cross-border contracts. These are the author’s risk management recommendations, not a guarantee that one approach will suit every franchise relationship or remove the need to review the contract as a whole.

In practical terms, the lesson can be turned into a checklist before granting exclusivity: define its geographical scope, link it to a measurable outlet-opening and purchasing schedule, clarify renewal and termination conditions, and examine the implications of any formal registration of the relationship. These elements should work together, rather than exist as separate clauses that conflict when a new expansion opportunity emerges.

Practical takeaway: Before signing an exclusive franchise agreement in the UAE, both parties should review the implications of registration, the scope of exclusivity and the performance obligations with a local legal adviser. Clear entry and exit terms help protect both the relationship and its growth plans.