Licensing Franchise Premises in the UAE: Conditions to Meet Before Opening

When you turn an established business into a franchise model in the UAE, do not assume that the licences for your first outlet will automatically cover new locations. The operating entity, business activity classification, building requirements and competent authority may differ. To protect relationships across your franchise network, you need a clear process that ties financial commitments, fit-out work and opening to evidence of approvals, rather than simply accepting the franchisee’s promise to ‘handle the licensing’.

1. Separate the franchise agreement from permission to trade

A franchise agreement grants contractual rights, such as using the brand and benefiting from the operating system, but it does not replace an economic licence or government approvals. The Ministry of Economy and Tourism explains that initial approval to establish a business does not authorise it to begin trading. Do not therefore treat initial approval alone as grounds for setting a firm opening date or admitting customers.

The UAE has no standalone, comprehensive federal franchise law, nor a general federal regime requiring a standard franchise disclosure document for all franchise agreements or their registration as franchise agreements. Depending on its nature, the relationship is governed by civil and commercial transaction rules, including Federal Decree-Law No. 50 of 2022 Issuing the Commercial Transactions Law, alongside company and trade mark laws and relevant local regulations.

Federal Law No. 3 of 2022 Regulating Commercial Agencies may apply where the relationship meets the conditions for a registered commercial agency. Do not assume that every franchise is a registered agency; seek a legal review of how the relationship should be classified before finalising the agreement. Likewise, do not rely on registration templates issued for another country, or confuse a preferential right securing a debt with a business franchise based on a brand and operating system.

2. Create a licensing checklist for each proposed location

Start by describing the activities the franchisee will actually carry out, rather than relying on the brand name alone. The model may combine retail sales, preparation, storage, delivery or a specialist service. Ask the relevant licensing authority to confirm the required activity categories and whether they are compatible with the legal structure and premises. Do not assume that a free zone licence automatically permits operations at any location outside that zone.

Create a tracking table that records, for each requirement: the competent authority, the document required, who is responsible for submitting it, the stage that depends on it and the renewal date. It may include:

• The economic licence, showing the correct business activity and operating entity details.
• The lease and its authentication or registration in line with the emirate’s requirements; in Dubai, this includes Ejari registration.
• Municipal and technical approvals and safety requirements appropriate to the activity and building.
• Approvals from regulators overseeing food, healthcare or education activities, where applicable.
• Signage or fit-out permits, where required.

Make this table specific to the location. Successful licensing in another emirate or building does not establish that the same layout will be accepted at a new site.

3. Check the premises’ suitability before committing to fit-out work

The franchisor’s commercial approval of a location is not regulatory approval. Premises may be attractive in terms of footfall and floor area, yet fail to meet ventilation, electrical load, storage or safe access requirements. Keep the commercial feasibility assessment separate from the assessment of whether the premises are suitable for the intended activity.

Ask the franchisee to collect property documents and available plans, and engage a technical specialist to check requirements with the relevant authorities. For a restaurant, for example, adequate seating space is not enough if the required food preparation facilities cannot be approved.

Before signing a binding lease or ordering bespoke equipment, try to negotiate terms that address the possibility of not obtaining essential approvals. These are contractual terms that require the landlord’s agreement, not an automatic entitlement. Also specify who bears the assessment and design costs if the premises are rejected, and how an alternative location will be approved, so that a regulatory refusal does not become a dispute over the franchisor’s responsibility for selecting the property.

4. Tie commitments to clear contractual conditions

Turn the licensing checklist into a contractual schedule reviewed by a local lawyer. The aim is not to transfer every risk to the franchisee, but to specify who carries out each task, who provides support and what evidence is acceptable as proof of completion. Clearly distinguish the franchisor’s approval of branding and fit-out from approval by the government authority.

Address four practical points in the schedule:

• Conditions for starting fit-out work: the documents and approvals needed before undertaking work that requires permission.
• Conditions for opening: the valid licences and approvals needed to carry out the business activity.
• Managing delays: notification duties, updates to the timetable and the process for approving extensions.
• Failure to obtain a licence: choosing alternative premises or terminating the arrangement, and settling payments and costs according to the reasons for the failure and the agreed terms.

Avoid wording such as ‘all fees are non-refundable under any circumstances’ without analysing its legal and commercial implications. Clarify which payments cover services already delivered, which relate to future obligations, and how equipment and training costs will be handled if the project stops. Do not allow a publicly advertised opening date to override the requirement to secure all necessary approvals.

5. Complete the approvals file before authorising opening

Appoint someone within the franchisor’s organisation to review the readiness file, without presenting that review as a substitute for official inspections. The file should contain valid copies of the required documents, consistent operator names, addresses and business activities, and a record of outstanding issues that have been resolved. A receipt acknowledging an application is not sufficient evidence that approval has been granted.

After opening, maintain a calendar of renewals and changes that require review by the relevant authorities, such as adding a business activity or making substantial alterations to the premises. Require the franchisee to notify you of any licence suspension or notice affecting continued operations.

Practical takeaway: Before authorising a new outlet to open, ask for three things: a location-specific licensing checklist, a contractual schedule allocating responsibilities, and a file of evidence confirming that all approvals are in place. These steps make expansion a verifiable commitment, rather than simply a date on the project plan.