Competition Exemptions for Franchising in the UAE: When Should You Apply?

When turning an existing business into a franchise in the UAE, some restrictions may seem essential to preserving the customer experience that has worked in your own branches. But applying those restrictions to a relationship between independent businesses calls for a different assessment. In franchising, ‘protecting the brand’ is not enough to justify every restriction. This guide explains how to decide whether to apply for an exemption from competition rules and prepare the evidence needed before adopting your model for expansion.

Understand the exemption and the legal framework

The UAE has no standalone federal law governing every aspect of franchising, nor a general federal pre-contractual disclosure regime specifically for franchises. Depending on its nature, the relationship is subject to general civil and commercial law, trade mark and competition legislation, and potentially the Commercial Agencies Law where its conditions are met. Signing a franchise agreement therefore does not remove the need to review the legality of the practices it introduces.

Federal Decree-Law No. 36 of 2023 on the Regulation of Competition governs the exemption process discussed here. The Ministry of Economy and Tourism explains that businesses may request an exemption for specific agreements or practices from the application of Articles 5, 6, 7 and 8, subject to the statutory conditions. Exemption applications are assessed under Article 9, with decisions issued under Article 10.

An exemption is neither registration of the franchise agreement nor blanket approval of the business model. It is a decision covering a specific agreement or practice for a set period, and may be subject to conditions and periodic review. Submitting an application should not be treated as permission to implement the restriction.

Identify the practice that needs review

Start by listing the obligations you intend to impose on franchisees, then separate quality and operational requirements from restrictions that could affect competition. A restriction is not automatically prohibited: its assessment requires consideration of its substance, effects, the relevant market and the scope of the law’s application.

Prepare a short summary for each practice, covering:

• The proposed wording in the agreement or operating policy.
• The parties and products or services it covers.
• Its proposed geographical scope and duration.
• Its specific operational purpose, rather than a general reference to brand protection.
• Its expected impact on the choices available to franchisees, customers and other businesses.

For example, if you link the use of a standardised technology system to a requirement to use a particular service provider, ask whether the benefit comes from system compatibility or from the identity of the provider itself. This helps distinguish an essential technical standard from a broader commercial obligation.

Have a competition law adviser review the list to identify what can be adopted, what needs amending and what warrants consideration of an exemption application. Not every restriction requires an application, and applying for an exemption is no substitute for this initial assessment.

Test necessity with evidence from pilot operations

The Ministry explains that an exemption assessment considers whether the practice contributes to economic development, technical or technological progress, or benefits for consumers. Restrictions must also be proportionate and limited to what is necessary, and must not eliminate competition entirely in the relevant market or a substantial part of it.

Turn these criteria into questions you can answer before expanding: what improvement does the practice deliver? How does the customer benefit? Could a less restrictive option achieve the same result?

Use pilot operations to gather practical evidence, such as fault logs, order-processing costs, service completion times and complaints linked to incompatible systems. Where possible, compare results before and after introducing the measure, explaining the limits of the comparison. Do not attribute every improvement to the restriction if other factors changed at the same time.

Test alternatives too: setting technical specifications rather than requiring a single provider, introducing qualification procedures for additional service providers, or shortening the commitment period. Document why each alternative is or is not adequate. A measure’s success in a company-owned branch does not, by itself, prove that it must be imposed on all independent franchisees.

Prepare a focused application and follow the decision process

For your internal working file, bring together a description of the business, the draft agreement or policy under review, an analysis of the market and alternatives, evidence of benefits, and an explanation of why the restriction is proportionate to its objective. This is not an exhaustive official checklist of supporting documents; check the Ministry’s current submission requirements when preparing the application.

Exemption applications are submitted to the Competition Department at the Ministry of Economy and Tourism. Under the published process, the Ministry first checks that the application and documents are complete, then assesses whether the substantive conditions are met. This may result in a reasoned decision granting approval, granting conditional approval or refusing the application, within the statutory time limits.

Appoint someone to respond to enquiries and retain copies of the documents. Do not make your franchise sales timetable dependent on an expected approval. With legal advice, prepare an alternative operational and contractual arrangement that can be used if the application is refused or the decision requires the practice to be narrowed.

Monitor the exemption once granted

If an exemption is granted, translate its limits into clear instructions for the contracting and operations teams. Record the practice covered, its duration and any conditions, and schedule a review before the exemption expires or the model changes. Do not assume that the decision automatically extends to new services or arrangements.

The Ministry explains that an exemption may be revoked if circumstances change, its conditions are not met, or it was based on inaccurate or misleading information. Keep the supporting evidence and check that the benefits relied on in the application continue to be delivered.

Practical takeaway: Before rolling out any restriction, establish why it is necessary, test a less restrictive alternative and obtain a legal assessment. If an exemption is needed, base the application on demonstrable effects, not on a desire to standardise everything.