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Article 8 of the Saudi Franchise Law

المادة 8 من نظام الامتياز التجاري · الفصل الخامس: التزامات صاحب الامتياز ومانح الامتياز

The article sets the franchisor's obligations, unless otherwise agreed in writing, such as defining the rights and business model, training, supply, confidentiality and not competing within the territory.

Official text (Arabic)

This article has not been amended since the law was issued.

يلتزم مانح الامتياز -ما لم يتفق كتابة مع صاحب الامتياز على غير ذلك- بما يأتي:

1- تحديد الحقوق الممنوحة لصاحب الامتياز في شأن الامتياز.

2- تحديد نموذج عمل الامتياز بشكل تفصيلي, بما في ذلك بيان المعايير وإصدار التعليمات التي يتعين على صاحب الامتياز التقيد بها عند ممارسة أعمال الامتياز، بما يمكنه من تشغيل تلك الأعمال، وكذلك تزويده بكتيبات التشغيل.

3- تدريب موظفي صاحب الامتياز.

4- تقديم الخبرات التقنية والتسويقية وغيرها من الخبرات التي تتطلبها طبيعة الامتياز الممنوح.

5- تزويد صاحب الامتياز -سواء بشكل مباشر أو عبر طرف آخر- بالسلع أو الخدمات الخاصة بالامتياز، وذلك طوال مدة سريان اتفاقية الامتياز، ما عدا السلع والخدمات التي يترك لصاحب الامتياز شراؤها من الغير.

6- المحافظة على سرية المعلومات والبيانات المحاسبية والمالية المتعلقة بأعمال صاحب الامتياز.

7- الاستجابة لطلب صاحب الامتياز تزويده بتفاصيل المقابل المالي المترتب عليه أو المدفوع منه في شأن ممارسة أعمال الامتياز.

8- عدم إقامة أي منشأة تمارس نشاطاً مماثلاً لنشاط صاحب الامتياز في المنطقة الجغرافية المحددة في اتفاقية الامتياز، أو منح الحق للغير في ذلك، خلال مدة سريان الاتفاقية.

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 8 explained in plain English

This article lists what the franchisor must do toward the franchisee. These obligations apply unless the two parties agree otherwise in writing, meaning they are the rule where the agreement is silent, and can be changed by a written agreement.

The franchisor must:

  1. Define the rights granted to the franchisee.
  2. Define the franchise business model in detail, including the standards and instructions the franchisee must follow, so as to enable him to operate, and provide him with operating manuals.
  3. Train the franchisee's employees.
  4. Provide expertise, technical, marketing and other, as the nature of the franchise requires.
  5. Supply the goods or services specific to the franchise throughout the term of the agreement, directly or through another party, except what the franchisee is left to buy from others.
  6. Keep confidential the accounting and financial information and data of the franchisee's business.
  7. Respond to the franchisee's request to provide him with the details of the financial consideration due from or paid by him.
  8. Not establish a competing business carrying out a similar activity in the geographic area set in the agreement, and not give others that right, throughout the term of the agreement.

This article is matched by Article 9, which sets the franchisee's obligations, such as obtaining the franchisor's approval when changing goods, the way of working or the location. It comes after Article 7, which regulates the disclosure document. In a dispute over breach of these obligations, it is advisable to refer to the text of the agreement and consult a lawyer who specializes in commercial cases.

Practical example

Majid owns a car wash franchise in a neighborhood in Riyadh that the agreement set as his territory. He learned that the franchisor plans to grant another franchise to an investor in the same neighborhood. Unless the agreement provides otherwise in writing, the franchisor is bound not to give others the right to establish a similar business in the set territory throughout the term of the agreement.

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 8 of the Saudi Franchise Law

Is the franchisor required to train my employees?

Yes. Unless otherwise agreed in writing, the franchisor must train the franchisee's employees.

Can the franchisor open a competing branch in my territory?

No. Unless otherwise agreed in writing, he may not establish a business carrying out a similar activity in the geographic area set in the agreement, or give others that right, during the term of the agreement.

Can the parties agree on something different from these obligations?

Yes. The article makes these obligations apply unless the franchisor agrees otherwise in writing with the franchisee.

Do I have the right to know the details of the amounts I paid to the franchisor?

Yes. The franchisor must respond to the franchisee's request to provide him with the details of the financial consideration due from or paid by him.

More articles on Obligations of Franchisor and Franchisee

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.