Article 20 of the Saudi Franchise Law

This article regulates what the franchisee is entitled to when the relationship ends in three cases, and what the franchisor is entitled to in a fourth.

First: Cases of the franchisor's obligation (himself or through a person within his group):

• If the franchisee requests termination of the agreement under Article 17;
• or the franchisor terminated the agreement in breach of Article 18, that is, before its term ended without the franchisee's written consent and without a lawful ground from those it lists;
• or the franchisor did not wish to renew or extend for a reason other than the cases in paragraphs 2 to 5 of Article 15 (one of the grounds in Article 18 occurring, non-payment of the consideration, approval of an assignment to a person meeting the criteria, or the franchisor's no longer wishing to carry out the business or grant a franchise in the Kingdom).

The franchisor is then obliged:

1. To repurchase the physical assets used exclusively in the franchise business, which the franchisee bought from him or from others on his instructions, within 60 days of the franchisee's request, at a price not less than what the franchisee paid, less depreciation of any equipment or fixtures, with depreciation calculated according to generally recognized accounting standards and the franchisee's previous accounting practices.
2. To compensate the franchisee for any loss he incurred in establishing, acquiring or operating the business in the Kingdom, and any other damage. This compensation does not cover the case of non-renewal; in that case the article is limited to repurchasing the assets.

Second: The franchisor's right: Unless the agreement provides otherwise, if the franchisee terminates the agreement in breach of the provisions of the Law, the franchisor may claim compensation for any damage he suffered.

It is preceded by Article 19 on compensation without termination, and followed by Article 21, which sets the periods for hearing compensation claims. To calculate entitlement in a particular case, it is advisable to consult a lawyer who specializes in commercial cases.