Authority to Sign a Franchise Agreement in the UAE

You may reach an agreement with a suitable investor, only to discover that the company signing the contract is not the one that will operate the outlet, or that its representative lacks the necessary authority. When turning an established business into a franchise in the UAE, agreeing on the business model is not enough. You must know who grants the rights, who assumes the obligations and who can legally bind each party. This modest verification exercise helps protect trust within the franchise community before money changes hands or fit-out work begins.

Identify the entity that will grant the franchise

Start with your own business, rather than focusing solely on the investor’s documents. The operating licence may be held by one company, the trademark owned personally by the founder, and supplier contracts signed by another company. Trading under a single name does not make these parties one legal entity, nor does it automatically authorise any of them to deal with the others’ rights.

Draw up a brief map showing who owns each right and who is responsible for each obligation:

• Who owns the trademark the franchisee will use?
• Who owns the manuals, content and operational know-how, or has the right to make them available?
• Which company will provide support, receive fees and issue invoices?
• Are there licences or internal agreements allowing the contracting entity to grant the required rights?

If the founder owns the trademark but the operating company will sign as franchisor, have the legal basis allowing that company to license its use reviewed. Do not bridge the gap with a general statement that the company ‘owns the system’. What is needed is a clear chain of rights consistent with the agreement’s scope and duration, including any right to sublicense.

This is not merely an administrative reorganisation: it tests whether the franchisor can actually deliver what it is selling.

Distinguish between the investor, the operating company and the signatory

You may negotiate with an individual, receive funding from a holding company and expect a newly formed company to operate the outlet. Record these roles separately from the outset. The person making the financial decisions is not necessarily the contracting party, and a shareholder is not necessarily authorised to sign on the company’s behalf.

Depending on the legal form and registration authority, request up-to-date documents sufficient to verify:

• The contracting party’s full legal name, registration number, licence and address.
• Its memorandum or articles of association and relevant amendments.
• The representative’s identity and the basis of their authority, such as an appointment resolution, shareholders’ resolution or power of attorney.
• The limits of that authority, including whether joint signatures or additional approval are required.

Do not assume that a job title, business card or company stamp alone establishes authority. Also check that the authorisation remains valid and covers the intended obligations. Seek a specific legal review if the agreement includes a guarantee, an arbitration clause or obligations requiring particular authority.

If the operating company has not yet been incorporated, do not insert a proposed name as though it already exists. Work with your legal adviser to establish who will be bound by any preliminary agreement, when and how the new company will join the relationship, and what approvals this requires. Do not assume that an investor signing in their own name automatically transfers the obligations to their future company.

Place verification within the UAE legal framework

The UAE has no standalone, comprehensive federal franchise law, nor a general federal regime requiring a standard disclosure document or registration of franchise offers simply because they are franchises. However, this does not exempt the parties from general rules governing contracts, valid representation and commercial obligations.

Depending on its nature and where the parties are established, the relationship is subject to civil and commercial transaction rules and company legislation. Federal Decree-Law No. 50 of 2022 governs commercial transactions, while Federal Decree-Law No. 36 of 2021 governs trademarks and their licensing. Federal Law No. 3 of 2022 on the Regulation of Commercial Agencies may apply if the relationship meets its conditions; not every franchise should be assumed to be a registered commercial agency.

In practice, ask your lawyer to review two separate matters: the entity’s legal capacity to enter into the relationship, and the individual’s authority to bind it. A company’s registration alone does not establish that any employee may sign on its behalf. Equally, valid signing authority does not give the company trademark rights it does not own or is not permitted to grant under its agreements.

For companies established in free zones, review the rules of their incorporation authority and their corporate documents, rather than assuming that all authorities have identical requirements. For foreign documents, check the requirements for acceptance, translation and attestation where necessary.

Establish an approval checkpoint before signing and payment

Make verification a repeatable procedure, rather than a series of scattered emails. Maintain a file for each transaction containing copies of the documents, the date of review, the reviewer’s name and any outstanding issue preventing approval to sign. Collect only the information needed, and restrict access to identity and authorisation documents.

Before sending the final version, match the legal name in the opening section, signature page and schedules against the approved documents. Ensure that the entity entitled to receive fees and the beneficiary account are consistent with those details, or that a documented arrangement explains any difference. If the contracting entity changes at the end of negotiations, repeat the checks rather than simply replacing its name.

Make any personal guarantee or commitment by a related company explicit and review it separately. A person signing as a company representative does not automatically guarantee its obligations with their personal assets.

Practical takeaway: Do not approve the signing of a franchise agreement until you can establish three things: the correct entity holds the rights, the correct party assumes the obligations, and the signatory has the necessary authority to bind that party.