Adding New Services to a Franchise in the UAE

Your existing business may successfully sell an additional service, but success at your own outlet does not automatically make it suitable for rollout across your franchise network. Before expanding in the UAE franchise market, you need a clear decision: is the service a core part of the model, a separate option or a trial that is not yet ready? That decision determines what you sell to investors and what you will later ask them to operate and fund.

Separate the new service from the original franchise promise

Start by describing how the service actually operates, rather than using the marketing name customers see. Adding product sales to a service business, or offering a mobile service alongside work carried out at an outlet, may change delivery requirements, responsibilities and costs. Sharing a brand and customer base does not necessarily mean the economic activity or its requirements are the same.

Create an internal decision sheet covering:

• The nature of the service, who provides it and where it is delivered.
• The equipment, skills and materials required.
• The entity that contracts with the customer and issues the invoice.
• Who is responsible for complaints, warranties or repeating the service.
• The reason for adding it: proven demand, a better customer experience or simply higher revenue.

Then classify it as a core, optional or trial service. Do not call it ‘optional’ if franchisees will, in practice, have to buy it to meet brand standards. Equally, do not include an unproven trial in the core franchise package simply because it increased sales at one outlet over a short period.

Check the economic activity before approving the addition

The UAE has no standalone, comprehensive federal franchise law, nor a general federal pre-contract disclosure regime specifically covering all franchise agreements. The relationship is governed by general contract, civil and commercial law, trade mark legislation and relevant licensing requirements. Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies may apply if the relationship meets its conditions; do not assume that every franchise is a registered commercial agency.

For the new service, the immediate question is: does the licensed activity of every establishment that will provide it cover that service? Official business set-up procedures explain that a licence can cover more than one activity and that some activities require additional government approvals. This does not mean that every complementary service is automatically covered by an existing licence.

In Dubai, Law No. 13 of 2011 Regulating the Conduct of Economic Activities governs activity licensing according to the relevant classifications and requirements. Federal Decree-Law No. 37 of 2021 on the Commercial Register also includes the type of activity among the details recorded in the register. You therefore need to check whether an activity must be added, registered details amended or approval obtained, rather than relying solely on the franchisor’s consent.

Ask the competent authority to clarify the classification and requirements, and retain its response or a reference to the approved procedure. Do not apply an answer specific to Dubai across other emirates or to a free zone. Nor should you treat initial approval as permission to start providing the service: it is not the same as completing the licensing process.

Test the impact on the core business

This is not a fresh test of the entire franchise model. It is a focused trial to establish whether the addition weakens the service on which the brand was built. Run it in an establishment licensed for the activity, and decide in advance what would lead you to adopt, modify or discontinue the service.

Measure delivery time, materials used, the need for additional staff and the effect on queues. Track the service’s revenue and direct costs separately, then allocate its share of management time, space and equipment costs. Higher sales alone do not prove that it is suitable for wider rollout.

Also monitor customers switching from the original service to the addition: does it generate new demand, or replace a profitable service with a more complex one? Review complaints and errors too, particularly where the team needs skills beyond those it normally uses.

Record the operating conditions needed for success, not just the overall result. The addition may work in a spacious branch with a specialist team but be unsuitable for a small outlet. In that case, approving it for a particular category of outlet may be better than imposing it on everyone.

Define participation and costs before rollout

Turn the trial findings into a clear proposal for franchisees. Explain whether the service is covered by the original franchise grant or requires separate approval and a contractual addendum. Specify who pays for equipment, training and approvals, how its sales count towards the agreed fees, and what support the franchisor will provide.

Do not assume that the power to update the operations manual allows you to require a franchisee to make a substantial investment or undertake a different activity. Review the limits of the agreement and seek legal advice on when an additional agreement is needed. If the service is optional, set objective approval criteria, such as suitable space, qualified staff and completion of regulatory requirements.

Prepare a concise implementation pack covering the service description, procedures, qualification requirements and complaints handling. Assign someone to sign off each outlet’s readiness, and distinguish internal brand approval from the necessary government approvals. Also set out how the service can be suspended if quality declines, and how existing commitments to customers will be fulfilled without confusion.

Practical takeaway: Before adding a service to your franchise, settle four points: its regulatory classification, operational viability, the scope of contractual obligations and outlet readiness. A good addition is not simply something you can sell; it is something you can deliver lawfully and consistently without weakening the original business.