Article 3 of the Saudi Franchise Law
المادة 3 من نظام الامتياز التجاري · الفصل الثاني: نطاق تطبيق النظام
The article provides that the Franchise Law applies to every franchise agreement carried out inside the Kingdom.
Official text (Arabic)
This article has not been amended since the law was issued.
يسري النظام على أي اتفاقية امتياز تنفذ داخل المملكة.
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 3 explained in plain English
This article sets the territorial scope of the Law's application in a short phrase: the Law applies to any franchise agreement carried out inside the Kingdom.
The criterion the article adopts is the place of performance; the text does not tie application to the nationality of the franchisor or the franchisee. If the franchise business is actually carried out in the Kingdom, the agreement falls within the scope of the Law under this text.
To understand what counts as a "franchise agreement", refer to Article 1, which defines it as an agreement between the franchisor and the franchisee under which the franchise is granted, that is, the right to carry out business for the franchisee's own account tied to a trademark or trade name of the franchisor, with expertise passed on and the way of operating set in return for consideration.
But not every arrangement resembling a franchise is subject to the Law, since Article 4 excludes a number of agreements and arrangements, such as franchises issued by royal decrees, contracts subject to the Commercial Agencies Law, contracts limited to selling goods or providing services bearing a trademark or using a trademark, arrangements in which the franchisee is wholly owned by the franchisor, and any other arrangements the Implementing Regulations specify.
This article is consistent with the aims of the Law in Article 2, which include encouraging franchise activities in the Kingdom and ensuring disclosure. Anyone with an agreement involving several parties or countries who wants to know whether it is subject to the Law is best advised to consult a lawyer who specializes in commercial cases.
Practical example
A foreign company owns a well-known restaurant brand and signed a franchise agreement with a businessman to open branches in Riyadh. Since the agreement is carried out inside the Kingdom, it is subject to the Franchise Law unless it is one of the cases excluded in Article 4.
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 3 of the Saudi Franchise Law
Does the Franchise Law apply to a foreign brand?
The Law applies to any franchise agreement carried out inside the Kingdom. The text does not tie application to the nationality of the parties but to the place of performance.
Is every contract connected with a trademark a franchise?
No. Article 4 excludes agreements such as commercial agency contracts and contracts limited to selling goods or using a trademark.
What is the criterion for applying the Law to a franchise agreement?
The criterion in the article is that the franchise agreement is carried out inside the Kingdom.
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 2
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.
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 حر
- 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.