Marketing Fund Governance Before Franchising in the UAE

When an established business in the UAE moves to a franchise model, marketing is no longer an internal decision funded solely by the founder. Franchisees may contribute to shared campaigns, and they need to know how their contributions are managed and what they pay for. Before collecting the first contribution, put clear marketing fund governance in place to protect trust across the franchise network. The aim here is not to set the fee, but to organise the money, decisions and accountability once that fee has been agreed.

1. Define the fund’s purpose and distinguish it from the franchisor’s own marketing

Start with a short document explaining who benefits from the fund and what it is for. Will it finance campaigns that attract customers to the brand’s outlets? Develop shared advertising materials? Or run digital channels serving the branches? Each purpose needs clear spending boundaries, so the fund does not become an open-ended budget for anything bearing the brand’s name.

In particular, distinguish between marketing products and services to customers and marketing the franchise opportunity to attract new investors. Franchise recruitment advertising directly supports the franchisor’s expansion and should not automatically be charged to the fund. Any administrative costs or services provided by the franchisor’s team should also be disclosed in advance, including how charges are calculated and the limits on their approval.

Divide expenditure into three practical categories:

• Permitted: producing shared materials, buying advertising space and using approved campaign measurement tools.
• Requiring special approval: appointing a supplier connected to the franchisor, or running a campaign that benefits only a limited number of outlets.
• Excluded: the founder’s personal expenses, operating losses and franchisee recruitment, unless covered by a separate, explicit arrangement.

Also explain whether franchisor-owned outlets contribute and how they are treated compared with franchised outlets. Fairness does not mean every outlet benefits equally from every advert, but it does require published rules that do not change according to who operates the outlet.

2. Align the fund policy with the contract and UAE rules

The UAE has no standalone federal franchise law, nor a general federal regime requiring all franchisors to provide a standardised disclosure document. However, the absence of such a regime does not justify concealing marketing obligations or making misleading promises. The relationship is governed by general rules on contracts and civil and commercial transactions, including Federal Decree-Law No. 50 of 2022 issuing the Commercial Transactions Law, depending on the nature of the arrangement and the relevant jurisdiction.

Federal Law No. 3 of 2022 regulating commercial agencies may apply if the arrangement meets its requirements and is registered as a commercial agency; a franchise agreement is not automatically a registered agency. Advertising financed by the fund must also take account of Federal Law No. 15 of 2020 on Consumer Protection and its Executive Regulations, including the requirement to avoid misleading claims, alongside any advertising approvals required for the activity and by the relevant local authority.

Make the fund policy a schedule to the contract and specify which documents take precedence if they conflict. The contract should explain the purposes of contributions, who is responsible for managing them, the limits on policy changes, the reports available and how unspent balances will be handled. Do not allow a material financial obligation to be changed simply by updating internal instructions without a clear contractual basis.

Give prospective franchisees the policy sufficiently ahead of signing to allow them to review it. Treat this as transparent practice, not as a standard statutory disclosure period. Engage a local adviser to review the wording and the accounting and tax treatment of contributions and invoices.

3. Establish an approval process that guards against conflicts of interest

Appoint one person to prepare the marketing plan and another to approve expenditure, and specify who checks that services have been delivered before payment. A small business can simplify these roles, but supplier selection, approval, payment and review should not all sit with one person without alternative oversight.

Create a separate accounting code for the fund and consider a separate bank account where appropriate to its structure. This separation is a transparency measure, not an assumption that there is a general legal requirement to establish a trust account for franchise marketing funds. Retain quotations, contracts, invoices and evidence of delivery, and link each expense to a specific campaign and objective.

If the advertising agency is owned by the franchisor or one of their relatives, disclose the relationship, compare its proposal with suitable alternatives and document the reasons for choosing it. You can also establish a franchisee advisory committee to discuss the plan, making clear whether its role is advisory or includes voting rights, and defining the limits of its authority. Poorly defined participation can create expectations the franchisor cannot meet.

4. Measure results and explain how benefits are distributed

Issue a regular report showing the opening balance, contributions collected, expenditure by campaign, outstanding commitments and the remaining balance. Do not rely solely on images of adverts or viewing figures; link results to the campaign’s objective, such as qualified enquiries or attributable orders, while explaining the limits of measurement accuracy.

Some outlets may benefit more than others because of their location or operating capacity. Agree in advance on the rules for selecting areas and local campaigns, and do not promise every franchisee a return equal to their contribution. For example, a shared awareness campaign might fund the brand’s broader visibility, while an individual outlet pays for its opening campaign under the agreed arrangement.

Set out a channel for raising objections, a response deadline and a process for carrying forward surplus funds or adjusting the plan. When an outlet’s participation ends, balances and commitments should be dealt with under the contract and applicable law, without assuming either an automatic refund or automatic retention.

Practical takeaway: Before collecting marketing contributions, prepare a spending policy, a contractual schedule, an approval process and a reporting template. Transparency backed by documentation is what turns shared spending into lasting trust across the franchise network.