The Proposal of the Commercial Franchise Law


The Stages of Public Participation in Decision-Making relevant to the Proposal of the Commercial Franchise Law:

First: Presentation:
The draft of the Commercial Franchise Law had been prepared, Accepted by Project Management Office at the Deputy Ministry of Policies & Regulations Affairs ​​​.

Second: Publishing:
The draft of the Commercial Franchise Law was launched on 23.01.2020 AD, through the Ministry’s official e-portal​ and the social media, also direct SMS was sent to the groups concerned with the rules & regulations, in addition to publishing a news through the Saudi News Agency and other media, including a copy of the said system or regulation and a form for expressing opinions, comments or notes. 

Third: Collecting E-Posts:
The following email (Franchise@mci.gov.sa) had been prepared to receive the feedback about the draft within the specified period. 

Total Public Participation in various channels 16 ​​


Fourth: Analyzing the E-Posts:
After the survey deadline ended on 20.02.2020 AD, the officials in charge of this proposal prepared a schedule containing the articles, feedback, notes and suggestions to be studied by the specialists.

Article number​​​
​​​Article text before polling​
​​​Public opinion
​​​Amend the article based on electronic Counseling​
​Article 1st
​Article One: Definitions:
1. The phrases and terms mentioned in these regulations shall have the meanings shown before each of them in Article (1) of the Commercial Franchise Law, issued by the Royal Decree No. (M / 22) dated 9/2/1441 AH.
2. The following expressions and terms - wherever they appear in this regulation – will define the meanings shown before each of them, unless the context requires otherwise:
(A) "The Competent Authority": The Ministry of Commerce and Investment.
(B) “Substantial Change”: Any change in information or circumstances that has an essential impact on the value of the franchise business or on the potential franchise holder’s decision to conclude a franchise
 agreement.
​​- You may find it appropriate to delete the term "The Competent Authority" , it is enough to say the "Ministry" to match the definition of the two terms.
- We see that the word “potential” to be deleted, since the franchise holder has been named, and this to be applied on all the articles mentioned therein, and not to be added.
As it was stated in Article (1) of the Commercial Franchise Law that the term “Ministry” means the Ministry of Commerce, So this administration suggests the amendment of the definition from the (Competent Authority) to (One of the Ministry of Commerce Sectors.

​1. The phrases and terms mentioned in these regulations shall have the meanings shown before each of them in Article (1) of the Commercial Franchise Law, issued by the Royal Decree No. (M / 22) dated 9/2/1441 AH.
Article 2nd​​
​Article Two: Agreements that are not considered franchise agreements
Subject to the provisions of Article (4) of this law, the Franchise Agreement is not considered any of the following agreements or arrangements:
1. The agreements or arrangements concluded by the franchise granter or a group with the franchise holder regarding the implementation of the franchise agreement, including the following:
a. The agreements or arrangements between the landlord and the tenant, or between the tenant and the sub-tenant.
B. The agreements or arrangements between the partners or shareholders.
C. Loan agreements or arrangements between creditors and debtors.
D. Agreements or arrangements between the employer and the worker, regarding the work relationship between them.
2. The agreements or arrangements whereby a non-profit organization buys goods for its employees, provides them with services, or helps them to purchase goods or use services.
3. The agreements or arrangements concluded between a number of concessionaires to purchase goods or provide services, and not aim to make a profit.
4. Licenses or permits granted by a government agency.
5. Agreements concluded to specify sites for the conduct of concession works or the identification of concessionaires in a specific geographic region, which entails the conclusion of concession agreements.
​Paragraph (5) of Article Two: Related to the exclusion of the agreements concluded to determine the locations of the franchise business practices. Specifying the locations of the franchise and the geographical areas is a mandatory item of the franchise agreement according to the text of the third article of the draft regulations, and this subject makes confusion, so how can the identification of sites and areas of franchise geography is a provision of the franchise agreement, and at the same time it is excluded from the scope of the provisions of the law? Even if it is concluded under agreements or annexes to the franchise agreements?. So we suggest the deletion of this paragraph from the draft regulations.
Paragraph 5: The geographical locations to conduct the franchise activities are determined within the franchise agreement concluded between the grantor and grantee. Therefore, we propose deleting it.

​Article Two: 
Subject to the provisions of Article (4) of this law, the Franchise Agreement is not considered any of the following agreements or arrangements:
1. The agreements or arrangements concluded by the franchise granter or a group with the franchise holder regarding the implementation of the franchise agreement, including the following:
a. The agreements or arrangements between the landlord and the tenant, or between the tenant and the sub-tenant.
B. The agreements or arrangements between the partners or shareholders.
C. Loan agreements or arrangements between creditors and debtors.
D. Agreements or arrangements between the employer and the worker, regarding the work relationship between them.
2. The agreements or arrangements whereby a non-profit organization buys goods for its employees, provides them with services, or helps them to purchase goods or use services.
3. The licenses or authorizations granted by government entity.

Article 3rd ​
​Article Three: Terms to be included in the franchise agreement.
Subject to the provisions of Article (eleventh) of this law, the franchise agreement must include - in addition to what is agreed upon between the parties - the following:
1. Any restrictions imposed on the franchise holder regarding the transfer of any of its rights, under the franchise agreement, to others or the transfer of the franchise business site.
2. Determine the owner of the trademark used in the franchise business, and the franchisor’s relationship to this trademark, if he is not the owner.
3. The right of both the franchise granter and the franchisor to terminate the franchise agreement.
4. The franchisor’s right to renew the franchise agreement, if any.
5. The rights and obligations of both the franchisor and the franchise granter in the event of termination or expiration of the franchise agreement.
6. Any restrictions imposed on the two parties to the agreement regarding the exercise of any competitive business to the franchise during the validity of the agreement, or after its termination or expiration.
7. The franchisor’s commitment not to harm the reputation of the granter and the franchise business.
8. The franchisor’s obligations related to the site or business location of the franchise, if any, and his right to change the location, if any.
The franchisor and the granter’s obligations related to the confidentiality of information and data protection.
​Paragraph 1: Delete the phrase “… or the transfer of franchise business”, what was mentioned in Paragraph 8 of the same article is sufficient, as it mentioned the obligations related to the franchise location.
Paragraph 4: Proposed text: “The franchisor’s right to renew the franchise agreement or not.
Paragraph 6: The provisions of this paragraph may conflict with the provisions of the Saudi Competition System, which prohibits imposing restrictions that may affect fair competition in the market.

​Article 3rd :
Subject to what is stipulated in paragraph (2) of Article (eleventh) of the law, the franchise agreement must include - in addition to what is agreed upon between the parties - the following:
a. Any restrictions imposed on the franchisor regarding the transfer of any of his rights, under the franchise agreement, to others.
B. Determine the trademark owner, the trade name, or other intellectual property rights used in the franchise business, and the granter’s relationship with the owner if he is not the owner.
C. The rights and obligations of both the granter and the franchisor to terminate the franchise agreement.
D. The franchisor’s right to renew, not renew or extend the franchise agreement, if any.
E. The rights and obligations of both the franchisor and the granter to terminate the franchise agreement or during its expiration.
f. Any restrictions imposed on both the franchisor and the granter regarding the exercise of any activities that compete with the franchise business during the validity of the agreement or after its termination or expiration, without prejudice to the provisions of the Competition System.
G. The franchisor's commitment not to harm the reputation of the franchise granter and franchise business.
H. The franchisor’s obligations related to the franchise site or business, if any, and his right to change that location or headquarters, if any.
I. Obligations of the franchisor and the granter regarding confidentiality of information and data protection.

​Article 9th 
​Article 9: Duration of the Franchise Registration
The registration of the franchise agreement and the relevant disclosure document is valid for the duration of the agreement's validity. The registration will be canceled in the following cases:
1. In the event that the franchise agreement is terminated or expired, provided that the parties of the franchise agreement submit a request to cancel the franchise registration to the competent authority.
2. The competent authority shall cancel the franchise registration in any of the following cases:
a. If it becomes evident to the competent authority that the franchise agreement or the disclosure document are no  longer meeting the conditions stipulated in the law, provided that the competent authority should give the franchise granter a written notice containing the relevant registration notes or about any notes regarding submitting the information. The competent authority is entitled to cancel the registration in the event that these notes are not avoided or amended within (ninety) days From the date of notification, or during a longer period of time granted by the competent authority.
If the franchise granter does not meet the requirements of the competent authority or does not submit the required information within (ninety) days, or within a longer period of time granted by the competent authority, the cancellation of the franchise registration will be effected accordingly.
​- Paragraph 1: We suggest that the request to cancel the franchise registration is submitted by one of the parties, because it is difficult to be submitted by the agreement parties in the event of a dispute or others.
Paragraph 1: This paragraph requires submitting a request by the two parties (and not from one party) regarding the cancellation of the franchise registration. This may constitute an obstacle to cancel the registration in the event of a dispute between the two parties.

Paragraph 2: Cancellation of the agreement by the competent authorities, despite it is legitimate, but it may harm the franchisor, especially in the event that the cancellation is resulted from the delay of the franchisor in submitting the requested information or responding to the competent authorities.

​Article 9th :
The registration of the franchise agreement and the relevant disclosure document shall be valid for the duration of the agreement’s validity. The registration shall be canceled in any of the following cases, provided that the franchise granter shall apply for the cancellation of the registration within ninety days of the occurrence of any of the following cases, namely:
a. Termination or expiration of the franchise agreement.
B. Issuance of a court ruling revoking or ending the agreement.



Fifth: Making and Announcing the Decision:
The amendments on the articles were studied and approved by the Ministry’s officials, and the said system was published through the Ministry’s official e-portal​ and social media, also via the Saudi News Agency and other various media.

Sixth: Closing the Discussion and Archiving:
After announcing the decision, the subject was officially closed and all the relevant documents were archived.


Last Modified 14 Oct 2020
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