F1000Research F1000Research 2046-1402 F1000 Research Limited London, UK 10.12688/f1000research.179699.1 Research Article Articles PROTECTION OF FRANCHISEES IN SAUDI ARABIA: A CRITICAL LEGAL ANALYSIS

[version 1; peer review: 1 not approved]

 ALSHEIKH ALDANAH Conceptualization Data Curation Formal Analysis Investigation Methodology Writing – Original Draft Preparation Writing – Review & Editing 1 2 PARVEEN REHANA Investigation Methodology Writing – Original Draft Preparation Writing – Review & Editing https://orcid.org/0000-0002-3546-4177 a 1 2 COLLEGE OF LAW, PRINCE SULTAN UNIVERSITY, RIYADH, SAUDI ARABIA, 11586, Saudi Arabia College of Law, Prince Sultan University, Riyadh, Riyadh Province, 11586, Saudi Arabia RPARVEEN@PSU.EDU.SA

No competing interests were disclosed.

 8 5 2026 2026 15 677 13 4 2026 Copyright: © 2026 ALSHEIKH A and PARVEEN R 2026 This is an open access article distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The author(s) is/are employees of the US Government and therefore domestic copyright protection in USA does not apply to this work. The work may be protected under the copyright laws of other jurisdictions when used in those jurisdictions. Background

Franchising in Saudi Arabia has been rapidly developing, which resulted in the adoption of the Commercial Franchise Law (CFL) in 2019 due to the Royal Decree M/22. This law was enacted to regulate franchising activities in Saudi Arabia, enhance transparency, fairness, and safeguard the rights of franchisees. Nevertheless, the success of the Commercial Franchise Law (CFL) in fulfilling these goals and particularly in protecting franchisees has come under scrutiny.

 Methods

The present paper critically analyzes the provisions of the Commercial Franchise Law concerning mandatory franchise disclosure, as well as the rights and duties of franchisors and franchisees. It further compares these provisions with franchising practices in other jurisdictions, particularly the United States and France. The study also provides an overview of the regulatory environment, including key instruments such as the Franchise Disclosure Document (FDD) requirements and the relevant enforcement mechanisms.

 Results

The study concludes that the Commercial Franchise Law contains clauses on the protection of franchisees including obligatory registration and disclosure, however, the law lacks effectiveness in certain aspects, especially the imposition of penalties in case of non-compliance. The absence of punitive measures against the failure to register agreements is another major weakness although it fosters transparency.

 Conclusions

Commercial Franchise Law is a major milestone towards improving protection of franchisees in Saudi Arabia but should be improved further. It is suggested that the Saudi government should put more elaborate enforcement protocols in place, come up with templates that FDDs should follow and that disclosure requirements should be applied retroactively to the current franchises. Despite its strengths, the Commercial Franchise Law still faces challenges in full implementation, particularly in enforcing penalties for non-compliance. Further refinements are needed to ensure the law effectively protects franchisees and enhances market confidence.

 Commercial franchise law; disclosure requirements; franchisee protection; transparency and fairness; NA NA The author(s) declared that no grants were involved in supporting this work. 1. Introduction

The role of franchising in the Saudi Arabian economy has expanded significantly in recent years, reflecting broader efforts to diversify the Kingdom’s economic base and promote private sector participation. By the end of 2024, the number of registered franchise businesses had increased rapidly, driven by both domestic entrepreneurs and international brands seeking to enter the Saudi market. This growth has been supported by policy initiatives aligned with economic transformation goals, making franchising an increasingly important vehicle for job creation, knowledge transfer, and small and medium enterprise (SME) development. However, the rapid expansion of the sector also created regulatory gaps and imbalances in bargaining power between franchisors and franchisees, necessitating a formal legal framework to govern franchise relationships. 1

In response, the Saudi government enacted Royal Decree No. M/22 on 8 October 2019, introducing the Commercial Franchise Law (CFL) the first comprehensive statutory regime specifically regulating franchising in the Kingdom. The CFL was designed to enhance transparency, promote fairness, and establish clear rights and obligations for both franchisors and franchisees. 2 A central objective of the law is to build trust in the franchising ecosystem by mandating disclosure and registration requirements, thereby reducing information asymmetry and protecting prospective franchisees from unfair practices. 3

Drawing on existing literature that emphasizes the importance of transparency in franchising systems, this study examines the mechanisms embedded within the Commercial Franchise Law to safeguard franchisee interests. Specifically, the analysis focuses on key provisions of the law, including compulsory registration, pre-contractual disclosure obligations, the delineation of franchisee rights, and the corresponding duties imposed on franchisors. It also evaluates enforcement mechanisms and available legal remedies in cases of non-compliance or dispute. To provide a broader perspective, the study compares the Saudi framework with established franchising practices in jurisdictions such as the United States and France, where disclosure-based regulation has long been a cornerstone of franchise law. Through this comparative approach, the paper assesses the effectiveness of the Commercial Franchise Law in achieving its intended objectives and identifies potential areas for policy refinement to further strengthen franchisee protection and regulatory efficiency.

 2. Legal framework of Saudi franchise law 2.1 Royal Decree M/22/2019

The legal framework of franchising in Saudi Arabia is the Commercial Franchise Law (CFL) which was introduced by Royal Decree M/22 in the year 2019. 4 The Decree was a breakthrough of the history of the franchise sector development in Saudi Arabia, as it laid the groundwork of regulations of the franchise operations, contracts, and guarantees in the interests of the franchisees. One of the Commercial Franchise Law (CFL) definitions of franchising is a business relationship in which a franchisor permits a franchisee to conduct business under the franchisor trademarks, proprietary knowledge, and business methods. 5 Notably, the law has an exception where it will only be applicable to new franchise agreements that are concluded after its coming into force, and therefore it is not applicable to pre-existing franchise agreements. An essential aspect of the Commercial Franchise Law (CFL) is that it is aimed at promoting transparency and fairness of the franchising relationship. The goals of the law as outlined in Article 2 of the CFL are to instil transparency, deliver the needed protections to the franchisees, and in the process maintain the principle of contractual freedom. This fairness in the interest of both protecting the franchisees and the autonomy of franchisors is paramount in the design of the law. The legislation underlines the idea that, though franchisee protection against unfair practices should be ensured, the autonomy of the parties to negotiate a franchisee-franchisor agreement should be regarded as a vital element of the franchising relationship. 6 The CFL is backed up with elaborate rules passed by Saudi Council of Ministers which further explain the procedures of registering the agreement of franchising and law-abiding procedures. These regulations involve certain provisions about franchisors in the aspect of franchise disclosure document (FDD) that is obligatory in all agreements of franchises and seek to promote transparency in all franchise transactions. 7

2.2 Registration requirements

The key feature of the Commercial Franchise Law (CFL) is an obligatory registration of the franchise agreement with the Ministry of Commerce (MoC). This is a necessity to improve transparency and to make sure that the transactions of franchises are under control. The MoC guidelines provide that franchise agreements signed with franchisors shall be registered with the MoC along with the FDD within a period of 90 days. 8 This is enabled by use of the Commercial Franchise Center (CFC) which has an online documentation filing system. The registration will make sure that all the franchise agreements are formally registered, forming a convenient database within the regulating use. 9 This is a compulsory registration system which fulfils several functions. First, it offers a process of monitoring the franchise deals, where both the franchisors and the franchisees will be subject to the law of contract as stipulated in the Commercial Franchise Law (CFL). Second, it establishes the method of assessment of the validity of franchise functioning, and has a reference point that may be used in the elimination of possible conflicts. A non- registration of a franchise agreement is viewed as the breach of the law, and Commercial Franchise Law (CFL) does not mention the punitive measures; however, the absence of registration becomes potentially disastrous as it would result in the inadmissibility of the deal or the fines in different jurisdictions. 10

2.3 Contractual content

CFL requires all franchise contracts to include certain provisions that give certain clarity and minimise the possibility of information asymmetry between the franchisor and franchisee. 11 As per the MoC guidelines, the franchise agreements should be written in Arabic or contain a certified Arabic translation. The contracts should contain various fundamental conditions such as the payment of the franchise fee, the term of the agreement, the area to be covered, and dispute resolution mechanism. Moreover, the laws dictate that some of the provisions must be present in any franchise contract, especially those that establish the responsibilities of the franchisor, e.g., training, technical assistance, and continued operation. 9 Such under-compulsory terms are aimed to defend franchisees as they will get proper support throughout their business. The presence of certain franchisor requirements is vital in the effort to curtail power imbalance, which mostly exists between franchisors and the franchisees. The Commercial Franchise Law (CFL) ensures that franchisees are not left in operation without proper guidance and support since the franchisors are obliged to share important information and describe their roles. 10 These provisions are also in accordance with the international standards regarding a franchise agreement, as franchisors are usually required to provide extensive support to franchisees. This is to ensure that the franchisees are equipped with the resources and training to uphold the quality and standards of the franchisor and therefore chances of failures in operation or confrontation are minimised.

 2.4 Mechanisms of protection of the franchisors

The Commercial Franchise Law (CFL) also has certain provisions protecting the rights of franchisees besides the provisions on transparency and fairness. Such protections cover the fact that the franchisors must make available to the franchisors, a copy of the franchise agreement and the FDD, and not less than 15 business days prior to the signing of the agreement. This time frame will allow franchisees sufficient time to consider the conditions of the arrangement, a personal legal counsel where essential, and decide to commit in the franchise relationship. 12 The other important protection tool is that franchisors are obliged to give themselves sufficient notice before terminating or refusing to renew a franchise agreement. The Commercial Franchise Law (CFL) requires the franchisors to state his/her reasons of terminating or declining a renewal of an agreement and allow franchisees to redress the grievances before the expiry of the agreement. This is a factor meant to safeguard franchisees against unreasonable or unfair termination, which can be costly in terms of financial and operational implications to the franchisee. 6 Moreover, the CFL provides a system of settling conflicts between a franchisee and franchisor. It involves the application of mandatory arbitration as a means of settling disputes as opposed to long and expensive court proceedings. A more efficient and quicker way of dispute resolution is known as arbitration and serves to make the process fairer to both franchisors and franchisees. 13

2.5 Implication on the Saudi Franchise Market

The entry of The Commercial Franchise Law (CFL) has had great impacts on the Saudi Arabian franchise market. With proper set of rules that govern franchise deals and the many safeguards offered to the franchisees, the law has made the operations of franchises to be more transparent and safer. In its turn, this will probably result in an influx of international franchisors to Saudi Arabia, which will further support the development of the franchise sector in the Kingdom. 6 The registration and disclosure requirements are useful in building confidence in the franchise system because would-be franchisees can be assured that franchisors are operating in a legal framework that enhances fairness and transparency. Protections granted to franchisees also lead to a more balanced environment in franchising, as both franchisors and franchisees have reasonable rights and responsibilities. 10 In addition, the Commercial Franchise Law (CFL) is a positive example to other nations in the Middle East and North Africa (MENA) region who are contemplating or even formulating their own franchise laws. The law of franchising in the country and the practice on transparency, protection of franchisee, and compliance with laws is a model that countries in MENA should consider as a way of regulating their franchising sectors to promote healthy competition and sustainable business development. 14

3. Mandatory Franchise Disclosure (FDD)

Pre-contractual disclosure is a pillar of the franchisee protection in Saudi Arabia. No one should underestimate the role of transparency in the process of signing a franchise agreement as it means that the potential franchisees will have all the required information to make a reasonable choice. Article 7 of the Commercial Franchise Law (CFL) in Saudi Arabia guarantees this coverage by forbidding franchisors to sign a franchise agreement with a potential franchisee without presenting a comprehensive Franchise Disclosure Document (FDD) and a copy of the agreement. 3 This is as per the international best practice and this would help to reduce the risks involved when investing in the franchise and ensure that franchisees have full knowledge of the terms and conditions that will guide their business affiliations with franchisors.

In the supporting regulations of the Commercial Franchise Law (CFL), it is further stated that the FDD is to be delivered to the franchisee no less than 14 days before anybody makes any commitment, whether in the form of payment or signing a contract. 15 The period of the review of 14 days is crucial because franchisees have enough time to thoroughly examine the documentation, seek the advice of a lawyer, and understand the terms of the relationship in the franchise. The FDD itself is a very elaborate document, which should address at least 17 different types of information. The following categories each entail important areas of the franchise, namely the name of the franchisor, the experience of the franchisor in the market, previous or imminent litigation involving the franchisor, cost and charges related to the start-up and the continued operation of the franchise, financial statements, intellectual property (IP) rights, and renewal and termination processes. 6 This is the holistic approach that is aimed at helping the franchisees get a clear picture of the business model, risks, and opportunities. The Commercial Franchise Law (CFL) is making such a broad disclosure mandatory to prevent the franchisees making an agreement without seeing through the scope of operation, financial, and legal challenges of franchising. The list of disclosure requirements outlined in the Commercial Franchise Law (CFL) is very closely like those in other such franchise systems like the United States, Australia, and the UNIDROT Model Law. Indeed, the Saudi disclosure requirements are arguably a variation of the US pre-sale disclosure that has been widely celebrated to lessen the information asymmetry in the franchise relationships. 15

As one does not need to be a lawyer to note, the necessity of franchisors to be an informative and accurate FDD is not merely a technicality, but a significant legal consequence. The CFL creates a strong legal responsibility to the franchisors to comply with these legal disclosure requirements. In case a franchisor does not deliver the required documentation or misplaced, or made false information, they are liable to the damages. 15 The provision is aimed at assuring that franchisors are motivated by the rule of law to disclose all the relevant information to the potential franchisees in full and in the correct format, which reduces the chances of litigation and supports trust between the franchisor and the franchisee. The liability-non disclosure or non-information adds strength to the integrity of the franchising system and consequently the franchisees are not deceived by the franchisees. Besides the provision of a remedy to the franchisees who suffered due to non-disclosure or misleading statements, the liability provisions included in the T Commercial Franchise Law (CFL) act as a restraint to unethical practice by franchisors. The law will provide a fairer environment in which both can engage in fair business practices because of holding franchisors accountable to their behaviours. Franchisees thus can sign contracts with less fear that they are under the law which is a critical factor in establishing long term relationships in the franchise business. 16

Upon signing the franchise agreement, the agreement, as well as the FDD, must be registered with the Ministry of Commerce (MoC) within 90 days of signing the agreement. This is one of the most important aspects of the Saudi franchise system because it guarantees that the franchise agreements fall under the government regulation. Registration of the documents allows the MoC to keep track of compliance with the legal requirements provided by the Commercial Franchise Law (CFL) and whether franchisors are complying with the disclosure regulations. 9 In actual sense the registration system has several roles. It provides a formal documentation of agreement of franchise and makes sure that franchisors and franchisees are performing their duties as required by law. Also, it may enable transparency and an increased accountability of the people since the MoC may review the franchise agreements and FDDs to ensure that the disclosures required are implemented and that the terms are in accordance with the Saudi regulations. This state regulation is important to raise the confidence of the franchise system and offer protection against fraudulent or deceptive franchising schemes. 3

The Saudi FDD regime is regarded as strong and competitive in the international perspective. It incorporates the disclosure practices that are prevalent in the United States and Australia before the sale with a mandate to file and register with a governmental registry. According to a study, 3 this method seriously changes the situation in the franchise business in Saudi Arabia by imposing transparency and accountability. There is a consensus that mandatory disclosure of franchises ensures that there is less discrepancy in information between a franchisor and a franchisee and thus there is less vulnerability to exploitation and that all franchise dealings are done fairly. 17 The legal and economic literature has abundantly discussed the theoretical basis of mandatory disclosure. According to scholars, making availability of franchisees with all available and correct information assists in aligning their expectations to the reality of the business model and avoid the occurrence of conflict or dissatisfaction in the future. 18 According to official reports in the context of Saudi Arabia, these measures are directly aimed at increasing investor confidence and drawing increased interest towards the developing franchise industry of the country. 1 The Saudi government is not only safeguarding the franchisees by giving them a clear approach to follow but also creating a sense of confidence and security in the operations of franchisors.

These disclosure and registration requirements are mandatory and this has created far-reaching economic and legal implications on the Saudi franchise industry. These provisions have assisted in standardising the practices by ensuring that all the franchise agreements are to be subject to the regulatory oversight, to ensure the franchise system is run within a legal framework that encourages equity and transparency. To the prospective investors, the requirements are an indication that the Saudi government is committed in ensuring that it has an open, competitive, and legally-appropriate business environment. This, in turn, pushes the local and international franchisors to invest in Saudi market, leading to the further diversification and development of the country in its economic sphere. 2 Besides, such transparent practices have been integrated into the legal system, making the franchisees more confident, as they are now more assured to engage in agreements with their rights being guaranteed. This has contributed to the creation of a more sustainable franchise ecosystem, in which both the franchisors and the franchisee could flourish in a legal system that serves their interests.

 4. Franchisor obligations and covenants

Following the Commercial Franchise Law (CFL), there are certain legal obligations that the franchisors must undertake in Saudi Arabia to maintain the protection of the franchisees and to guarantee the correct functioning of the franchising relationship. These responsibilities are core to the operations of the franchise system as they provide a guide through which franchisees can exercise their operations with the benefit and resources, they require to achieve success. Some of the key issues that the CFL handles in the relationship between franchisors and franchisees are training, know-how provision, and competitive restrictions.

4.1 Mandatory franchisee training and support

Among the most important requirements of franchisors in the Commercial Franchise Law (CFL) is the thorough training of the personnel of the franchisee. This incorporates education in diverse areas of the franchise business including marketing, running and customer service. The regulations postulate that the franchisor must provide training to employees of the franchisee to enable them to operate the franchise in a way that is consistent with the standards set by the franchisor. 19 The training should be done in all areas of operation that will ensure the quality and integrity of the brand of franchises. This requirement assists in ensuring that the franchisees are provided with skills and knowledge needed to manage the business well and finally lead to the overall ssuccess of the franchise system.

Besides training, the franchisors are also required to offer technical and operational expertise to the franchisees. This also involves providing an official manual of operations that gives specific procedures, protocols, and standards that are supposed to be adhered to in the running of the franchise. The manual is also a primary instrument of franchisees that can help to maintain the uniformity of all the branches and support the branded name of the franchisor. 3 The manual generally contains guidelines on all aspects such as store layout and product delivery to marketing and customer service expectations. The Commercial Franchise Law (CFL) also makes sure that franchisees are not left to determine how to operate their business on their own, by asking franchisee to give this manual to its franchisors and this may minimise the occurrence of operational inefficiencies and brand inconsistencies. Such a responsibility of training and operational advice is critical in the reduction of the inherent risks of the franchise. Having made sure that franchisees get the promised support and resources, the Commercial Franchise Law (CFL) decreases the chances of the emergence of conflicts caused by the lack of preparation and insufficient guidance. 20 These provisions are mandatory which makes the franchise system stronger because it gives the franchisee the tools required to succeed at the very beginning.

 4.2 Marketing and the Continuing Support

The Commercial Franchise Law (CFL) is also a compulsion on franchisors to extend their marketing and operational assistance to their franchisees. Such assistance is normally described in the franchise agreement, which defines the extent of the role of the franchisor in terms of advertisement, promotion, and market building. 3 The franchisors are supposed to help the franchisees to ensure that their franchises remain visible and competitive with marketing programs that can be integrated into the general brand strategy. The franchisor will also in most occasions organise national or regional advertising campaigns, the franchisees will contribute to the costs and enjoy the brand exposure. This assistance is mainly necessary in making sure that the franchisees can easily compete within the market particularly in industries that have a great deal of competition. The Commercial Franchise Law (CFL) will establish a win-win relationship between the franchisor and the franchisee by ensuring that the franchisor offers continued marketing and business development assistance to the franchisee to ensure that both parties collaborate in growing the brand and achieving revenue. 21 It also protects the franchisees against the risk of operating in an environment where they would otherwise find it difficult to develop brand recognition and customer loyalty independently by the provision of marketing support. Through centralisation of resources about marketing and advertising, franchisee owners are enabled by franchisors to access the type of resources and marketing strategies that could otherwise not be accessible by small business proprietors.

 4.3 Non-competition clauses and Territorial rights

The other important provision of the Commercial Franchise Law (CFL) is the competition between franchisors and their franchisees. The law makes franchisors not to compete with their franchisees in similar territory. This clause is meant to ensure that franchisees are not in direct competition with the franchisor, as this will destabilise their business and eventually cost them the market share. It is known that franchisees depend on the exclusive use of the brand, trademarks, and marketing strategies of the franchisor to attract their customers, and the law guarantees that the franchisors cannot weaken this exclusivity through the opening of competing franchises in a similar region. 22 As much as the Commercial Franchise Law (CFL) permits inclusion of non-compete clauses in franchise agreements, they should make sense in terms of scope and duration. The Saudi courts are mandated to declare non-compete agreements as void that can be considered too restrictive or unwarranted to the interests of the franchisor. This clause makes sure that franchisors cannot put unreasonable demands on franchisees that will restrict their operational capacities and expansion of their businesses. 22 As an illustration, a non-compete agreement that bars a franchisee to run a similar business in the same location during an unrealistically long period of time would be a matter of legal concern and would have been ruled unjustifiable. Such limitation on competition is in line with best practice of franchise regulation since numerous jurisdictions, such as Australia, have a comparable restriction in franchise legislation. The Franchising Code of Conduct in Australia restricts the competitiveness of franchisors with franchisees, making sure that franchisees could use exclusively the brand and intellectual property of a franchisor without the risks of franchisor ruining their business. 3 The CFL position on non-compete agreement is based on the reality that both sides of the franchise agreement should have an equilibrium based on the interests of the parties involved and as a result, allow the franchisee to operate fairly and productively within a conducive environment.

 4.4 Legal implications of franchisor obligations and economic implications

The legal and economic consequences of the obligations on franchisors that are created by the Commercial Franchise Law are far reaching on the franchise system in Saudi Arabia. Legally, these requirements make franchisors responsible to ensure that franchisees are given the resources and support needed to conduct business successfully as well as training. These requirements make the provisions mandatory and minimise the chances of franchisees signing contracts under which they are abandoned or unprepared to operate their businesses. 21 This, on its part assists in fostering stability in the franchise industry and instils confidence in the franchisees and franchisors. In economic terms, the incumbency requirements by the franchisors to offer continuous support, training and marketing services make it a more sustainable form of franchising. The law encourages the development of the franchise industry by providing the franchisees with the tools they would require to be successful, which attracts both international and local franchisors to invest in the Saudi market. With the increased number of franchisors in the Saudi market, the franchise ecosystem becomes larger overall and allows more local entrepreneurship to succeed in operating a franchise business. 23 In addition, the Commercial Franchise Law (CFL) restricts the capacity of the franchisor to compete with his or her franchisee within the same region, and therefore the franchisee will develop their enterprises without the fear of direct encroachment by the franchisor. This is also a provision that builds trust between the franchisors and the franchisees as it will ensure that both parties will share the success of the franchise without any fear of unfair competition.

 4.5 Conformance to global best practices

The terms of the Commercial Franchise Law (CFL) are consistent with the best practices in the regulation of franchises around the world. Similar legal, regulatory requirements as apply to the franchisor to train and support and offer franchisees clear terms of contract to protect the franchisee are available in many countries, such as the United States, Australia, and the European Union. 24 These commitments included in Saudi law will help to make the Kingdom franchise industry competitive and appealing to local and foreign investors. It is specifically the focus on compulsory training of franchisees and transfer of know-how. The Commercial Franchise Law (CFL) can do this by legally compelling franchisors to offer such fundamental resources to franchisees so that they are not disadvantaged while launching their businesses. This is a legal right to the knowledge of the franchisor, which is an important advantage of franchising and is essential in the success of the franchisee. 24

5. Franchisee rights and remedies

The Commercial Franchise Law (CFL) provides franchisees substantial legal rights to defend against the investment. Key rights include:

Change of Control: Franchisees are allowed to sell or transfer a franchise with the approval of franchisor, which cannot be unreasonably refused. The legislation expects the franchisees to be capable of leaving or attracting new investors, based on objective standards. 24

Renewal/Extension: The law does not provide an absolute right to renew the franchise, but it acts as a reminder to the franchisee to inform his intention of renewing at least 180 days in advance. A franchisee may invoke a contract law in case the franchisor declines to renew without any justifiable reason. The forced notice aids in planning on the part of the franchisees. 25

Termination Compensation: In the case of termination or an expiry of the agreement, franchisees can demand the franchisor to repurchase the specialised equipment and they can also claim the compensation of reasonable losses incurred (Art. 8). This is a good protection: it works like a statutory buy-back or recovery right, which is uncommon in non-consumer agreements. The law expressly voids any such clause of a contract which seeks so to waive such rights except in a final settlement.

These solutions soften the losses of the franchisees. As an illustration, if a long-term contract is terminated, the franchisee can recoup some sunk costs. This is more favourable compared to the U.S. law where there is no automatic buy-back and franchisees must depend on the negotiated terms. The Saudi practice is like certain European ones (e.g. French Loi Doubin investment reimbursement on discontinuation of indefinite franchise).

Enforcement: Commercial Franchise centre of the MoC deals with registrations and disputes. Fines and penalties are covered by CFL (e.g. SR 10,000 in case of the absence of registration, CFL Art. 23). Also, statutory rights are void on contract and no mandatory protection can be undone by contractual waivers. Alternative dispute resolution is also acceptable, but it is not clear whether the rulings on arbitration can supersede the preservative rights.

As a matter of fact, these legal rights empower franchisees. As an illustration, a study 3 believe that such provisions make the franchise industry more predictable and investor-friendly. But the only way that this will be effective is by enforcement: courts will have to be ready to award damages or to enforce buy-back orders. Lack of a body of case law means that there is uncertainty until one is formed. 3

6. Comparative analysis and gaps

Comparing Saudi law with the United States (which follows FTC regulation) and France highlights differences as seen in Table 1.

Key franchise regulations in Saudi Arabia, USA, and France (compiled by author from official legal sources).
Aspect Saudi Arabia United States France
Disclosure Mandatory FDD; register with MoC (14-day pre-signing rule). FTC Rule: 14-day disclosure, but no govt registration. Loi Doubin: 20-day pre-signing disclosure (French Commercial Code L330–3).
Training/Support Required by law (training, manuals, support). No specific law; depend on contract negotiations (some states have implied duty of good faith). Required to provide franchise manual; continued supply (EU Directive 2000/65/EC Art.6).
Non-Compete Allowed if reasonable; courts may modify unreasonable covenants. Enforced under general law; some states (CA) heavily restrict post-term non-competes. Allowed if reasonable in scope/duration; EU competition law prohibits abuse (Art 101).
Renewal Rights Notification 180 days prior; no guaranteed renewal (but refusal may be contested). No statutory renewal (Texas has disclosure of renewal rights). No statutory renewal; contract terms prevail (Article L330–13-1 requires 3-month notice).
Termination and Buy-Back Franchisee can request equipment repurchase and compensation (CFL Art. 8). No federal requirement; buy-out terms rarely mandated (optional). Indemnity due for early termination of indefinite term (Art. L330–13-3).
Waiver of Rights Waiver by franchisee void except final settlement. Generally, waiver upheld unless unconscionable (no specific ban). Waiver of statutory rights is void (consumer-protection orientation).

Gaps: The Commercial Franchise Law (CFL) has some weaknesses although it has strengths. It does not contain a clear set of provisions on dispute resolution: arbitration is permitted, but it is not possible to determine whether the statutory rights can be rejected by arbitrators. Sanctions on the failure to register are vaguely stipulated (CFL, Art. 23 speaks of violations, but does not specify costs). Variability Model FDD forms are not published, but are authorised. Franchisees still do not have protection in pre-2019 agreements until they are renewed. 21 In comparison with such jurisdictions as Australia, the Saudi law is not as detailed with the requirements of the financial performance data of franchisees (e.g., an optional claim to earnings in CFL, Art. 7(3)).

 7. Policy recommendations

To enhance protection of franchisee in Saudi Arabia, a few policy recommendations are suggested. These suggestions will help build a more open and accommodating franchise structure so that the franchisors and franchisees can operate with more confidence.

To begin with, the Ministry of Commerce (MoC) is supposed to publish standardised Franchise Disclosure Document (FDD) and franchise agreement model. Such templates would offer a very explicit framework between the franchisors and the franchisees which would result in the consistency and complete disclosure throughout the industry. The MoC can assist in minimising the possibility of misleading and/or incomplete disclosures by providing model documents, which would encourage a more transparent and fair process of franchising. This would be like the U.S. Federal Trade Commission (FTC) Model FDD that has been effective in offering a standardised approach that the franchisors can use, thus making certain that the franchisees obtain all the information that they need before engaging in a contract.

Secondly, the franchise regulation system enforcement should be further elaborated. The MoC should explicitly establish fines or even consequences on the franchisor licenses in case of non-conformity to the registration and disclosure requirements, to make sure that franchisors abide by the regulations. Having a well-developed monitoring system in the MoC would allow the authorities to conduct frequent audits of franchise filings to make sure that franchise agreements and FDDs comply with the law fully. This would not only be a way of deterring non-compliance but also a means of ensuring the value of transparency in the franchising process.

The other important recommendation entails an increase in the scope of the disclosure requirements. Presently, the Commercial Franchise Law (CFL) is applicable solely on new franchises. It can however be thought out that it can be useful to apply the disclosure requirements retrospectively and force the existing franchises to rebuckle their heads after a certain grace period. This would enable the MoC to have all the new and existing franchises operating with the same standards which would lead to a more even playing field in the sector. It might also give the chance to correct all shortcomings in the available franchise agreements and to align them to the existing regulatory requirements.

Moreover, to prevent lengthy court battles on the concept of market value of franchises, the MoC may introduce standardised rules on how the price to repurchase and compensate a franchisee in case the franchisor chooses to discontinue or repurchase a business of a franchisee. With proper and objective standards that determine the prices of repurchases, franchisors and franchisees would clearly understand what their financial rights and responsibilities are and this would minimise issues of conflicts that could occur and improve overall fairness between the franchise and franchisee.

Lastly, the MoC must initiate extensive education and support initiatives to sensitise the franchisees on their rights and obligations under the Commercial Franchise Law (CFL). These programmes may comprise informational seminars and internet resources and specific instructions on how to manoeuvre within the franchise system. The MoC can empower the franchisees with information on their legal rights and resources available to them to make informed decisions, thus creating a more equal and sustainable franchise market. The process of educating the franchisees on their rights will also serve to prevent the exploitation and make more franchisees join the system with confidence.

Overall, the recommendations aim at ensuring the improved protection of franchisees in Saudi Arabia by establishing transparent and stable legal frames, reinforcing enforcement processes, and ensuring that franchisees are knowledgeable and well-advocated in the course of their business. Such policies would contribute to the creation of a more balanced, transparent, and successful franchise ecosystem in the Kingdom.

 8. Conclusion

The Commercial Franchise Law (CFL) of 2019 is one of the major successes in ensuring the security of franchisees and the control of the franchise industry in Saudi Arabia. Having an orientation toward compulsory disclosure, registration, and legal measures in case of the termination of a franchise agreement, The Commercial Franchise Law (CFL) is quite like the international standards, including the Federal Trade Commission (FTC) practice in the United States and the Loi Doubin in France. Nevertheless, although the law seeks to accommodate the peculiarities of the Saudi franchise market, it has customised these international frameworks to accommodate the local market conditions and business practices to have a balanced and fair franchising in Saudi Arabia Among the most important particularities of the CFL is its disclosure requirement compulsory, this is, franchisors must disclose all the necessary information to prospective franchisees prior to any contractual obligation. This information is not restricted to financial details but also covers information about the business operations, litigation patterns, intellectual property rights of the franchisor and other essential items which also influence decision making of the franchisee. It is an international standard, including those of the FTC Model Franchise Disclosure Document that has been widely applied to encourage transparency and justice in franchise arrangements. With such a system, the CFL assists in solving the information imbalance that usually exists in franchise relationship and as such franchisees can access the information that they need to make sound decisions.

In addition, the Commercial Franchise Law (CFL) CFL requires franchise agreements to be registered with the Ministry of Commerce (MoC) within 90 days of signing. Such registration procedure generates an official account of the transactions on the franchises, and the MoC can track the compliance and assure that all the agreements are in line with the requirements of the law. The mandatory registration requirement does not only enhance transparency but also enhances the credibility of the Saudi franchise market where the investor is assured of confidence. This is an important aspect of supervision because the franchise sector is expanding in Saudi Arabia and this aspect offers greater protection to franchisees, as they are assured that their interests are protected during the period of franchise agreement. The law also presents significant legal redresses to the franchisees when termination or non-renewal of franchise contracts are unfair. The Commercial Franchise Law (CFL) aids in stabilising the relationship of franchisees by giving them a fair right to knock out unjust terminations and curbing the exploitation of the franchise by the franchisor. This legal framework will provide franchisees with a more enhanced security and provides their investments with a higher safe-haven under the law an important milestone towards finding fairness in franchise dealings.

 Data availability statement

All data used in this study consist of publicly available legal, regulatory, and policy documents related to franchising in Saudi Arabia. These materials are fully cited in the References section and can be accessed through their original sources, including official government platforms such as the Saudi Ministry of Commerce ( https://mc.gov.sa). Key documents include Commercial Franchise Law (CFL, 2019), Commercial Franchise Law, Royal Decree M/22, Ministry of Commerce, Saudi Arabia. As all data are publicly available, there are no access restrictions. No separate compiled dataset was created for this study, and therefore no additional dataset is available for request. For any queries regarding the sources or data used in this study, please contact the corresponding author: Dr. Rehana Parveen (Corresponding Author), rparveen@psu.edu.sa.

The data for this article consists of bibliographic references, which are included in the References section.

 Acknowledgement

The authors would like to acknowledge the support of Prince Sultan University for paying the Article Processing Charges (APC) of this publication.

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Competing interests: No competing interests were disclosed.

 26 5 2026 Copyright: © 2026 Awwad A 2026 This is an open access peer review report distributed under the terms of the Creative Commons Attribution Licence, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. recommendation reject

PROTECTION OF Franchisees in Saudi Arabia: A CRITICAL LEGAL ANALYSIS

The manuscript addresses an important and timely topic concerning the legal protection of franchisees in Saudi Arabia and offers several valuable observations. The article has the potential to make a meaningful contribution to the field. Nevertheless, a number of substantive and methodological issues should be addressed before the manuscript is considered suitable for indexing.

Article publication and DOI assignment prior to peer review precluded the measurement of the similarity index.

The abstract should clearly articulate the novelty and contribution of the article.

Methodology: The article title states "A CRITICAL LEGAL ANALYSIS." It also notes reliance on a "comparative approach," explicitly stating, "the study compares the Saudi framework with established franchising practices in jurisdictions such as the United States and France." However, the comparative approach alone is insufficient and requires adherence to established rules. This entails tracing the relevant legal issues, comparing the three legal systems, and identifying similarities and differences, rather than confining the analysis to a brief paragraph of a few lines as seen in section "6. Comparative analysis and gaps." Furthermore, the analytical methodology is absent from the article. The article predominantly utilizes a descriptive approach, as it focuses on presenting the statutory provisions of the Saudi Franchise Law. Consequently, the methodology adopted is unclear and insufficiently defined. This manuscript requires further analytical work.

There is no list of abbreviations. Abbreviations should be written in full at their first occurrence and subsequently referred to by their abbreviated form. A list of abbreviations should be provided at the end of the article.

The research question is not clear, as it should address the protection of franchisees in Saudi Arabia, comprehensively encompassing both civil and criminal legal protection.

Consult the official translation of the law issued by the "Official Translation Department," available at "ncar.gov.sa." This source demonstrates [that] the correct title is "Franchise Law," not "Commercial Franchise Law (CFL)." Including the word "Commercial" is redundant because franchising is inherently a commercial activity. Maintain this terminology throughout the article. Consequently, the acronym "CFL" is inappropriate and requires amendment.

Reference 2: The link directs readers to the Ministry of Commerce website and does not refer to the Commercial Franchise System. Review the citation to ensure proper documentation, including the access date.

Reference 3: The link leads to an intermediary website, and the title does not match the attached file. Review and verify the citation.

When documenting the legal definition of franchising, referring to a secondary source (Reference 5) instead of the law directly is unacceptable. Furthermore, the link for this reference is incorrect. Substantively, the cited definition differs entirely from the definition in (Article 1/5) of the law.

2.1 Royal Decree M/22/2019: "Notably, the law has an exception where it will only be applicable to new franchise agreements that are concluded after its coming into force, and therefore it is not applicable to pre-existing franchise agreements".... This phrasing requires revision. This rule does not constitute an exception. The general legal principle dictates that legislation applies prospectively to events occurring after its entry into force. Retroactivity constitutes the true exception.

Reference 6: The law must be properly cited by referencing the publication issue number in the Umm Al-Qura Gazette and adding the link to the official translation.

2.2: The abbreviation "MoC" is ambiguous and does not uniquely identify the Saudi Ministry of Commerce.

2.2: Reference 9: The citation contains no link to the specified website.

2.2: The article states: "A [The] non-registration of a franchise agreement is viewed as the breach of the law, and Commercial Franchise Law (CFL) does not mention the punitive measures;".... This statement is incorrect. Article 24/1 of the law imposes a penalty for violating any of its provisions, including the registration rules described at the beginning of the paragraph as: "The key feature of the Commercial Franchise Law".

2.2: Furthermore, Reference 10, cited to substantiate claims absent from the law, is inaccessible.

2.2: Additionally, the article overlooks civil liability and the right to compensation in the event of a breach of disclosure or registry obligation under Article 19. This demonstrates an insufficient grasp of the detailed provisions of the law and the facets of legal protection, whether civil or criminal.

2.4 Mechanisms of protection of the franchisors: References 12 and 13 are inaccessible.

Mandatory Franchise Disclosure (FDD): The article states, "Article 7 of the Commercial Franchise Law (CFL) in Saudi Arabia guarantees this coverage by forbidding franchisors to sign a franchise agreement with a potential franchisee without presenting a comprehensive Franchise Disclosure Document (FDD) and a copy of the agreement".... This statement contradicts the explicit wording of Article 7/1, which states: "1. The franchisor shall provide the franchisee with a copy of the disclosure document, as prescribed by the Regulations, at least 14 days prior to concluding the franchise agreement or from the date of any payment made by the franchisee in relation to the franchise, whichever occurs first." The statute uses the expression "shall provide," which differs entirely from the term "forbidding" employed by the authors. The academic foundation for this interpretation remains unclear.

 3: References 15 and 16 are inaccessible.

3: Reference 21 cannot be considered an academic source, as it is merely an article published on a website.

 3: References 8, 19, 20, 21, 23, and 24 require the addition of the respective DOIs in accordance with the journal's documentation requirements.

4.3 Non-competition clauses and Territorial rights: "The other important provision of the Commercial Franchise Law (CFL) is the competition between franchisors and their franchisees." ... This paragraph requires redrafting to utilize the term "Non-competition"

The article states, "As much as the Commercial Franchise Law (CFL) permits inclusion of non-compete clauses in franchise agreements, they should make sense in terms of scope and duration." However, the text fails to discuss or define the nature of this scope and duration. If the manuscript adopts an analytical methodology, it must examine this issue to determine whether the law prescribes specific limitations or if these parameters are derived from general principles.

 Heading (4.4) requires linguistic revision to avoid repeating the word "implications." A suitable amendment is "4.4 Legal and economic implications of franchisor obligations." Furthermore, this section is brief and fails to reflect the true legal implications.

4.5 Conformance to global best practices: "The terms of the Commercial Franchise Law (CFL) are consistent ... such as the United States, Australia, and the European Union." ... This paragraph is generalized and falls short of rigorous scientific research methodologies, including the comparative approach explicitly adopted by the authors. The text fails to provide evidence or analysis demonstrating specific points of convergence or divergence. To justify these claims, the authors must explicitly compare the Saudi law with the regulations of the cited jurisdictions (the United States, Australia, and the European Union).

7. Policy recommendations: The article includes highly commendable policy recommendations. However, these recommendations require practical utility and feasibility. The section needs concrete proposals to achieve completeness. Necessary additions include a standardized Franchise Disclosure Document and standardized rules governing repurchase pricing and franchisee compensation.

Policy recommendations: "Secondly, the franchise regulation system enforcement should be further elaborated". This recommendation requires reconsideration in light of the previous observations in section "2.2 Registration requirements."

The manuscript lacks a balanced presentation of the rights and obligations of both franchise parties (the franchisor and the franchisee). The authors must analyze this balance comprehensively rather than adopting a one-sided perspective. The law establishes specific rights for each party and imposes distinct duties in return. The manuscript should reference specialized literature in this field, such as: Legal Aspects of the Franchise Contract.  https://dx.doi.org/10.21608/lalexu.2010.271981; The Legal Obligations of the Parties in a Franchise Contract: A Study According to the Saudi Franchise Law. https://doi.org/10.36941/jesr-2025-0185 ; Obligations of Franchise Contract Parties.  https://dx.doi.org/10.21608/jfslt.2021.142790  ; Commercial Concession Contract (Franchise) According To The Saudi Commercial System Its Nature and Effects. https://doi.org/10.21608/jlr.2024.276916.1406 & Franchise Contract. https://doi.org/10.21608/jlaw.2021.190663

Overall, the manuscript constitutes a meaningful contribution to the field Franchisees in Saudi Arabia. With the recommended revisions, it would be suitable for indexing in this journal.

Is the work clearly and accurately presented and does it cite the current literature?

Partly

If applicable, is the statistical analysis and its interpretation appropriate?

Not applicable

Are all the source data underlying the results available to ensure full reproducibility?

No

Is the study design appropriate and is the work technically sound?

Partly

Are the conclusions drawn adequately supported by the results?

Partly

Are sufficient details of methods and analysis provided to allow replication by others?

Partly

Reviewer Expertise:

Civil Law; Contracts; Franchise contracts; Protection of personal data; civil liability; medical liability

I confirm that I have read this submission and believe that I have an appropriate level of expertise to state that I do not consider it to be of an acceptable scientific standard, for reasons outlined above.

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