Article 2 of the Saudi Franchise Law
المادة 2 من نظام الامتياز التجاري · الفصل الأول: أحكام عامة
The article states the aims of the Franchise Law: encouraging franchising and regulating it transparently, protecting both parties, ensuring disclosure, and raising the quality of goods and services.
Official text (Arabic)
This article has not been amended since the law was issued.
يهدف النظام إلى تحقيق ما يأتي:
1- تشجيع أنشطة الامتياز التجاري في المملكة, من خلال وضع إطار نظامي ينظم العلاقة بين صاحب الامتياز ومانح الامتياز مع ترسيخ مبدأ حرية التعاقد، ووضع أسس لهذه العلاقة تقوم على مبدأ الشفافية.
2- توفير الحماية اللازمة لصاحب الامتياز ومانح الامتياز, وبخاصة عند انتهاء اتفاقية الامتياز.
3- ضمان الإفصاح عن الحقوق والواجبات والمخاطر المتعلقة بفرص الامتياز؛ لمساعدة صاحب الامتياز المحتمل على اتخاذ قرارات استثمارية صائبة.
4- رفع مستوى جودة السلع والخدمات المعروضة في المملكة، وضمان استمرارها.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 2 explained in plain English
This article explains the purposes for which the Franchise Law was made, and it helps in understanding and interpreting its other articles. There are four aims:
- Encouraging franchise activities in the Kingdom by setting a legal framework that regulates the relationship between the franchisee and the franchisor, while keeping the principle of freedom of contract and basing this relationship on transparency.
- Protecting both parties: the franchisee and the franchisor alike, especially when the franchise agreement ends.
- Ensuring disclosure of the rights, duties and risks connected with the franchise opportunity, so that the prospective investor makes a sound investment decision before entering into it.
- Raising the quality of goods and services offered in the Kingdom and ensuring their continuity.
In practice, these aims mean that the Law does not remove the parties' freedom to agree, but sets a minimum level of clarity and protection. The third aim is linked to the definition of "disclosure document" in Article 1, which is the document that discloses the main rights, duties and material risks of a franchise opportunity. Article 3 then provides that these rules apply to any franchise agreement carried out inside the Kingdom.
This article does not itself create a specific obligation on either party, but it shows the spirit in which the other articles are read. Anyone studying a franchise opportunity or redrafting an agreement can use a lawyer who specializes in commercial cases to understand what follows in their situation.
Practical example
Khalid is thinking of buying a franchise of a well-known cafe in Jeddah. He understands from the aims of the Law that he has the right to see the rights, duties and risks before committing, because ensuring disclosure is an express aim of the Law, so he asks for the disclosure document and reads it carefully before making his decision.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 2 of the Saudi Franchise Law
What is the aim of the Franchise Law in Saudi Arabia?
To encourage franchise activities through a transparent legal framework that respects freedom of contract, to protect the franchisee and the franchisor especially when the agreement ends, to ensure disclosure, and to raise the quality of goods and services.
Does the Law protect only the franchisee?
No. The article provides for the necessary protection of the franchisee and the franchisor together, especially when the franchise agreement ends.
Does the Law remove the parties' freedom to contract?
No. One of its aims is to entrench the principle of freedom of contract while setting foundations for the relationship based on transparency.
More articles on General Provisions and Scope of the Franchise Law
- Article 1
The article defines the key terms of the Franchise Law, such as franchise, franchisor, franchisee, franchise agreement, business model, control, group and disclosure document.
يقصد بالعبارات والمصطلحات الآتية -أينما وردت في هذا النظام- المعاني المبينة أمام كل منها, ما لم يقتض السياق غير ذلك: 1- النظام: نظام الامتياز التجاري. 2- اللائح
- Article 3
The article provides that the Franchise Law applies to every franchise agreement carried out inside the Kingdom.
يسري النظام على أي اتفاقية امتياز تنفذ داخل المملكة.
- Article 4
The article lists agreements and arrangements that are not franchise agreements for the Law's purposes, such as franchises by royal decree, commercial agencies, trademark licenses and wholly owned companies.
لأغراض تطبيق النظام، لا تعد اتفاقية امتياز أي من الاتفاقيات أو الترتيبات الآتية: 1- الامتيازات التي تُمنح أو تَصدُر بموجب مراسيم ملكية. 2- الاتفاقيات أو العقود
- Article 26
The Minister must issue the Regulations within 180 days of the Law's publication, and the article lists topics they must include, such as templates, disclosure requirements, fees and the competent body.
يصدر الوزير اللائحة خلال (مائة وثمانين) يوماً من تاريخ نشر النظام، ويعمل بها من تاريخ العمل به, على أن تتضمن ما يأتي: 1- تخويل الوزارة بإصدار نماذج اتفاقيات الا
- Article 27
The article provides that the Franchise Law takes effect 180 days after its publication in the Official Gazette and repeals every provision that conflicts with it.
يعمل بالنظام بعد مضي (مائة وثمانين) يوماً من تاريخ نشره في الجريدة الرسمية، ويلغي كل ما يتعارض معه من أحكام.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.