For Enhancing Trade and Investment Environment in the Kingdom
MCI is about to launch the proposal of business franchise system in the Kingdom, which comes within the framework of the Ministry’s legislative plan, that aims to improve trade and investment environment and enhance the Saudi economy, in order to achieve the objectives of the Kingdom’s Vision 2030.
The proposal of business franchise system aims to fill the legislative gape, while organizing the franchise business activities in the Kingdom. Therefore, it is intended to develop a legal framework that regulates the relationship between the franchisor and the franchisee, according to the principles based on transparency, disclosure and trust, which contribute to the encouragement of small & medium Saudi and non-Saudi companies to adopt business franchise model, since it has got less risks than other business models, as this system gives the ministry the power to publish educational articles and put indicative items to be included in the concession agreements to regulate the relationship between the franchisor and the franchisee.
For providing legal protection to the franchisee, the new proposal oblige the franchisor to make full disclosure of the most prominent rights and duties relating to franchise opportunities, offered to the prospective franchisee, so that they can obtain sufficient information that enable them to take the right investment decisions.
The franchise proposal stipulates that the franchisee should have at least a minimum experience in the operation of franchise business as a condition for granting any business franchise in the Kingdom. On the other hand, the franchisor should make full disclosure and highlight the risks, rights and obligations relating to the franchise opportunities, to be offered to the prospective franchisee, through the record of franchise agreement form and the disclosure document kept at the Ministry. The proposed franchise system would be enforced on all franchise agreement whether fully or partially applied within the Kingdom, and its regulations would be enforced as well on the franchisees and the franchisors. Meanwhile, such provisions will not be enforced on franchise business practiced outside the Kingdom.
The proposed business franchise system includes as well various important articles, relating to the settlement of disputes, either through the competent courts or amicably, also deals with the renewal or termination of business franchise, as well as the rights of the franchisor and franchisee.
The Ministry of Commerce and Investment has already called on those interested and the public to review the proposed business franchise system and to give their opinions and suggestions through the following link: mci.gov.sa/Franchise
,deadline on Sunday, 27/4/1438 H corresponding to 25/01/2017 AD.