Lead Story

Franchise relationships are built on long-term commercial commitments, but they can unravel quickly when disagreements arise over royalties, territorial rights, performance standards, intellectual property, termination or renewal. When negotiations fail, franchisors and franchisees must decide how the dispute will be resolved: through court litigation or arbitration.

The choice is not simply a question of which process is faster. It can affect the forum in which the dispute is heard, the confidentiality of sensitive business information, the ability to challenge a decision, the cost of proceedings and the ease with which an eventual judgment or award can be enforced.

For international franchise networks operating across several jurisdictions, the decision becomes even more significant. A carefully drafted dispute-resolution clause can reduce uncertainty, while a poorly drafted one can itself become the subject of litigation.

Why Franchise Disputes Can Become Complex

Unlike a conventional commercial contract, a franchise agreement typically governs a continuing relationship involving trademarks, operating standards, supply arrangements, fees, marketing obligations and business know-how. A dispute may therefore involve several contracts and parties at the same time.

A franchisee might allege that a franchisor has unfairly restricted its territory or failed to provide promised support. A franchisor, meanwhile, could claim unpaid royalties, misuse of intellectual property or a failure to comply with operational standards. Termination disputes can be particularly contentious because both sides may have substantial financial interests in keeping the business operating.

The legal issues can also extend beyond the franchise agreement. Employment, competition, intellectual property, consumer protection, agency, taxation and corporate law may all become relevant.

That complexity makes the dispute-resolution mechanism more than a standard boilerplate provision. It is a strategic part of the franchise agreement.

The Case For Litigation

Court litigation remains an important option, particularly where a dispute requires the involvement of state authorities or where the parties need remedies that are more readily available through the courts.

A court proceeding may be appropriate where the dispute involves third parties that are not bound by the arbitration agreement. This can matter in franchise disputes where claims extend beyond the franchisor and franchisee to directors, suppliers, landlords or other entities.

Court proceedings may also provide established procedural mechanisms, including appeals where available under the applicable legal system. The UAE's official government platform, for example, recognises civil litigation as a formal route for resolving disputes and provides mechanisms for filing and conducting proceedings electronically.

There can also be practical advantages to having a dispute determined by a national court when the assets, business operations and evidence are concentrated in that jurisdiction.

But litigation has disadvantages. Court proceedings may become lengthy, procedural and costly, particularly where appeals are pursued. Public court proceedings can also expose commercially sensitive information, although the degree of public access varies between jurisdictions and types of proceedings.

For a franchise business whose reputation and confidential operating model are commercially important, that exposure can be a serious consideration.

Why Arbitration Appeals to Franchise Networks

Arbitration is often attractive to international franchisors because it allows the parties to select the tribunal, seat of arbitration, procedural rules and, to a certain extent, the language of the proceedings.

The ability to appoint arbitrators with experience in franchising, intellectual property, distribution or other relevant commercial fields can be particularly valuable in technically complicated disputes.

Confidentiality is another important consideration. Arbitration is generally more private than court litigation, although the precise level of confidentiality depends on the applicable law and institutional rules. For a franchisor, this can help protect information concerning business models, pricing, expansion strategies, customer data and proprietary systems.

The UAE has a dedicated federal arbitration framework under Federal Law No. 6 of 2018 on Arbitration. The law provides, among other things, that where a valid arbitration agreement covers the dispute, a court may dismiss the court action if the respondent invokes the arbitration agreement in accordance with the statutory requirements.

This makes the drafting of the arbitration agreement particularly important. The parties should not assume that simply inserting the word "arbitration" into a contract will resolve every procedural question.

The Enforcement Question

For cross-border franchise arrangements, enforcement may ultimately be more important than the initial forum.

A franchisor may be based in one country, the franchisee in another and the franchise business in a third. A favourable decision has limited commercial value if it cannot be enforced efficiently against assets located elsewhere.

Arbitration can have an important advantage in this context because international enforcement is supported by the New York Convention, to which the UAE is a party. The Convention establishes a framework for recognition and enforcement of foreign arbitral awards, subject to its conditions and exceptions. United Nations materials also record UAE court decisions concerning the New York Convention.

That does not mean an arbitral award is automatically enforceable everywhere. Enforcement can still involve court proceedings and questions concerning jurisdiction, public policy, due process and the validity of the arbitration agreement.

Nevertheless, for a multinational franchise network, the possibility of obtaining an award capable of recognition in multiple jurisdictions can be a significant strategic advantage.

Arbitration is Not Always Cheaper

One common assumption is that arbitration is necessarily quicker and less expensive than litigation. That is not always the case.

Arbitration involves tribunal fees, institutional fees, legal costs and other expenses. A complex three-member tribunal can become expensive, particularly where the dispute involves extensive documentary evidence and expert testimony.

Franchise disputes can also become procedurally complicated if multiple agreements contain different dispute-resolution clauses. A franchisor might have one arbitration clause in the franchise agreement, another mechanism in a development agreement and separate arrangements with suppliers. The result can be jurisdictional arguments before the substantive dispute is even addressed.

Court proceedings, by contrast, may provide a more established procedural structure and, depending on the jurisdiction and value of the claim, may prove more economical.

The correct conclusion is therefore not that arbitration is cheaper than litigation. Rather, the economics depend on the dispute, the jurisdiction, the contractual structure and the remedies required.

Confidentiality Versus Transparency

Confidentiality can be particularly important in franchise disputes. A dispute may reveal sales figures, royalty structures, customer information, expansion plans, proprietary manuals or allegations concerning breaches of operating standards. A franchisor may not want such information entering the public domain, while a franchisee may have similar concerns about commercially sensitive information.

Arbitration generally offers a more private environment, although confidentiality should be addressed expressly in the agreement or through the applicable institutional rules rather than simply assumed.

Litigation, meanwhile, can provide greater transparency and the authority of a public judicial system. In some disputes, that may be advantageous, particularly where the parties want a judicial precedent or where questions of public law and statutory rights are involved.

The Importance of the Arbitration Clause

If arbitration is selected, the arbitration clause must be drafted with precision. The agreement should identify the disputes covered by arbitration, the seat of arbitration, the applicable procedural rules, the number and method of appointment of arbitrators, the language of proceedings and the governing substantive law.

The parties should also consider whether arbitration should be administered by an institution or conducted on an ad hoc basis.

The choice of seat is particularly important because it determines the legal framework governing the arbitration and the supervisory courts. It should not be confused with the physical location of hearings.

Equally important is ensuring consistency between the arbitration clause and other contracts forming part of the franchise structure. Poor coordination can create parallel proceedings and jurisdictional disputes.

When Court Proceedings May Be Better

Despite the attractions of arbitration, litigation may be the better option in certain franchise disputes. If urgent judicial intervention is required, parties should examine what interim or protective measures are available through the chosen mechanism. Although arbitration laws can provide mechanisms for interim relief and courts can have supporting powers, the practical route can depend heavily on the circumstances.

Litigation may also be preferable where the dispute involves parties who have not agreed to arbitrate or where the central issues concern statutory rights that cannot effectively be resolved through private arbitration.

The location of assets should also influence the decision. If virtually all relevant assets and evidence are located in one jurisdiction, a local court may provide a more straightforward enforcement route.

A Hybrid Approach May Work

Franchise agreements do not necessarily have to choose between negotiation, mediation, arbitration and litigation as mutually exclusive concepts.

A tiered dispute-resolution mechanism can require senior management negotiations first, followed by mediation and, if those efforts fail, arbitration or litigation.

Such a structure can give the parties an opportunity to preserve their commercial relationship before resorting to a binding adjudicative process. That is particularly relevant to franchising, where the parties may need to continue working together even after a disagreement.

The UAE's official government platform recognises mediation and other alternative methods alongside litigation and arbitration as mechanisms for resolving commercial disputes.

Choosing the Right Mechanism

There is no universal answer to whether franchise disputes should be resolved through litigation or arbitration.

For a domestic franchise with assets and operations concentrated in one jurisdiction, court litigation may offer a practical and cost-effective solution. For an international franchise network involving multiple jurisdictions, arbitration may offer greater flexibility, privacy and potential enforcement advantages.

The decision should therefore be made when the franchise agreement is negotiated — not after the relationship has broken down.

A well-designed dispute-resolution provision should consider the parties' jurisdictions, governing law, location of assets, likely remedies, confidentiality requirements, costs, enforcement strategy and the possibility of involving third parties.

Ultimately, the strongest franchise agreement is not one that assumes a dispute will never happen. It is one that anticipates how the dispute will be handled when the commercial relationship comes under pressure.

For franchisors and franchisees, choosing between litigation and arbitration is therefore not merely a procedural decision. It is a strategic decision about how much control the parties retain over one of the most consequential stages of their business relationship.

Franchise relationships are built around detailed contracts that define how a business operates, what the franchisee must pay, how the brand is protected and what rights the franchisor can exercise. But as markets, regulations, technology and consumer expectations change, an important question often arises: Can a franchisor change the terms of a franchise agreement?

The answer depends largely on the wording of the agreement, the nature of the proposed change and the law governing the relationship.

Franchisors commonly need some flexibility to update operating standards, introduce new technology, modify procedures or maintain consistency across a franchise network. Franchise agreements may therefore give them discretion to make certain changes without obtaining individual consent from every franchisee.

That discretion, however, is not necessarily unlimited. A franchisor seeking to change fundamental commercial terms, impose substantial new financial obligations or alter rights that were expressly agreed in the original contract may need a stronger contractual or legal basis.

For franchisees, the distinction between a permitted operational change and an unauthorised amendment can be significant. For franchisors, exceeding contractual powers can lead to disputes, claims for breach of contract or other legal consequences.

What Does the Franchise Agreement Allow?

The starting point is always the franchise agreement itself. A franchise agreement is a legally binding contract that normally establishes the rights and obligations of both parties. It may cover the initial franchise fee, royalties, marketing contributions, territory, intellectual property, operating standards, training, renewal, termination and dispute resolution.

Many franchise agreements also contain provisions giving the franchisor a degree of flexibility. These provisions may allow changes to operating manuals, brand standards, technology, reporting procedures or other aspects of the franchise system.

The precise wording matters. A clause allowing the franchisor to update operational procedures is different from a clause allowing it to alter financial obligations. Likewise, a provision permitting changes to brand standards does not necessarily give the franchisor the power to rewrite the entire commercial bargain.

Before implementing a change, the franchisor should therefore identify the contractual provision that is said to authorise it and determine whether the proposed action falls within its scope.

Can a Franchisor Introduce New Operational Standards?

Operational standards are among the areas where franchisors commonly retain discretion. The franchise model depends heavily on consistency. Customers expect the same brand identity, service standards and, in many cases, products and customer experience across different franchise locations.

A franchisor may therefore need to introduce new requirements during the life of the agreement. A restaurant franchisor, for example, may require franchisees to adopt updated food safety procedures, packaging, menus or point-of-sale technology. A retail franchisor may introduce new store layouts, digital systems or customer-service requirements.

Such changes may be permitted where the agreement gives the franchisor authority to update its operating standards.

The issue becomes more complicated when an operational change requires significant expenditure. A requirement to replace a software system may be relatively routine, while an unexpected demand for a major store refurbishment could impose a substantial financial burden.

Whether such a requirement is enforceable will depend on the contract and applicable law, as well as the nature and extent of the change.

What About New Fees and Financial Obligations?

Changes involving money are generally more sensitive. A franchise agreement may specify the royalties, advertising contributions and other fees payable by the franchisee. It may also contain mechanisms allowing certain charges to be adjusted periodically.

A franchisor cannot necessarily assume that such a provision permits it to introduce any new fee it considers commercially appropriate.

For example, a contract might allow an advertising contribution to be adjusted according to an agreed formula. That is different from introducing an entirely new charge that was not contemplated by the agreement.

The distinction can be particularly important where a proposed fee has a significant impact on the franchisee's profitability.

Franchisees should examine the contractual basis for any new charge, including whether the agreement specifies an amount, calculation method, adjustment mechanism or purpose for the payment.

Where the contract does not provide a clear basis for the new obligation, the franchisor may need the franchisee's agreement to amend the contract.

Can a Franchisor Change the Franchise Manual?

Franchise agreements frequently incorporate an operating or procedures manual by reference. This arrangement can give franchisors considerable flexibility because operating manuals can be updated more easily than the underlying franchise agreement.

Businesses may need to revise procedures in response to changes in technology, legislation, safety requirements or consumer expectations. A franchisee may therefore be contractually required to comply with an updated manual.

But incorporating a manual into a franchise relationship does not necessarily give the franchisor unlimited authority.

A provision allowing the franchisor to update operational procedures should not automatically be interpreted as permission to introduce fundamentally different financial or commercial obligations.

For example, updating customer-service procedures may fall within the expected scope of an operating manual, whereas introducing a substantial new payment obligation through the manual could raise a different contractual question. The precise wording of the agreement is therefore critical.

When Does a Change Become a Contractual Amendment?

Not every change to a franchise business amounts to an amendment of the franchise agreement. Some changes may simply implement rights that already exist under the contract. Others may alter the parties' agreed rights and obligations and therefore require a formal amendment.

A change to a franchisee's territory, for example, could affect a fundamental contractual right. Similarly, changing the duration of the agreement, royalty structure or termination rights could amount to a material alteration of the original bargain.

Where the franchisor already has an express contractual power to make a particular change, a separate amendment may not be necessary. Where that authority does not exist, however, the parties may need to agree to a variation.

The distinction can become a source of disputes when one party considers a change to be an operational requirement while the other considers it a contractual amendment.

Are There Limits on Contractual Discretion?

Even where a franchise agreement gives the franchisor discretion, that discretion may be subject to limits.

The applicable rules differ between jurisdictions. Courts may consider the language of the contract, the purpose of the relevant provision and the circumstances in which the discretion was exercised.

A franchisor should therefore avoid assuming that a broadly drafted discretionary clause provides unrestricted authority to make any change it wishes.

Other areas of law may also be relevant. Depending on the jurisdiction, franchise relationships can be affected by competition law, consumer protection legislation, commercial agency rules, franchise-specific regulations and other mandatory legal requirements. A contractual provision may not be capable of overriding a mandatory statutory rule.

What Happens If a Franchisee Refuses the Change?

A franchisee faced with a new requirement should first determine whether the agreement already requires compliance. If the requirement falls within the franchisor's contractual authority, refusing to comply could potentially constitute a breach of contract. Depending on the agreement and applicable law, this could result in a formal notice, enforcement proceedings or, in serious cases, termination.

The position may be different if the franchisor is attempting to impose an obligation that is not supported by the agreement.

In such circumstances, the franchisee may have grounds to challenge the requirement or request a formal amendment rather than simply accepting the change.

Both parties should exercise caution before treating non-compliance as a contractual default. Establishing the legal basis for the change should come first.

How Should Changes Be Documented?

Clear documentation can reduce the risk of disputes. Where a franchisor has the contractual authority to introduce a change, it should generally communicate the new requirement clearly and identify the relevant contractual provision.

The notice should explain what is changing, why the change is being introduced where appropriate, and when it will take effect.

Where the change requires the franchisee's consent, the parties should consider recording the agreement through a formal written amendment.

Documentation is particularly important where changes affect fees, investment requirements, territory, intellectual property, renewal rights or termination provisions.

A clear record can also help establish whether the change was imposed under an existing contractual power or agreed as a variation.

What Should Franchisees Check Before Accepting a Change?

A franchisee receiving a proposed change should not assume that it is automatically binding. Several questions should be considered.

First, does the franchise agreement expressly permit the change? Second, is the proposal genuinely operational, or does it alter a fundamental commercial term? Third, does the agreement specify a procedure for introducing such changes? Fourth, will the change create additional costs or financial obligations? Fifth, are there statutory or regulatory restrictions that could affect the franchisor's ability to impose it? Finally, what are the contractual consequences of refusing to comply?

Reviewing these issues can help a franchisee distinguish between a routine operational update and a potentially significant contractual variation.

What Should Franchisors Consider Before Making Changes?

Franchisors also need to approach contractual flexibility carefully. Before implementing a new requirement, they should identify the precise contractual authority on which they intend to rely and assess whether the proposed change falls within that authority.

The commercial impact should also be considered. A relatively minor administrative change is likely to present different issues from a requirement that forces franchisees to make substantial investments.

Where the contractual position is unclear, obtaining the franchisee's consent through a formal amendment may provide greater certainty than relying on a broadly worded discretion clause.

Franchisors should also ensure that changes are communicated consistently and that franchisees are given sufficient information to understand their new obligations.

The Importance of Careful Drafting

Many disputes concerning contractual changes can be reduced through careful drafting at the beginning of the franchise relationship.

A well-drafted agreement should distinguish between matters that the franchisor can change unilaterally and those requiring the franchisee's consent.

It should also address how operating standards, technology, equipment, refurbishment requirements and fees may evolve during the term.

For franchisees, these provisions deserve close attention during negotiations. The degree of contractual flexibility granted to the franchisor can have a significant effect on the franchisee's costs and business planning over the life of the agreement.

For franchisors, clearly defined powers can provide the flexibility needed to protect and develop the brand while reducing uncertainty about the limits of their authority.

Conclusion

Franchise businesses need to adapt as markets, regulations and customer expectations change. Franchisors therefore commonly retain powers allowing them to update operational standards and maintain consistency across their networks.

But contractual flexibility is not necessarily a licence to rewrite the franchise agreement. Changes to fundamental commercial terms, particularly fees and other financial obligations, may require specific contractual authority or the franchisee's consent. Mandatory laws can impose additional restrictions, while disputes may arise if a franchisor exercises contractual discretion beyond its intended scope.

The key questions are therefore straightforward: What does the franchise agreement permit? What type of change is being proposed? And what procedure does the contract require?

For both franchisors and franchisees, answering those questions before a change is implemented can help preserve the commercial relationship and reduce the risk of costly contractual disputes.

Franchising can offer a business a faster route to expansion, allowing it to enter new markets without funding every outlet itself. But turning a successful business into a successful franchise system requires more than a popular product, a recognisable brand or a profitable first outlet.

A company considering becoming a franchisor must be able to demonstrate that its business model can be replicated by independent operators while maintaining consistent standards. It must also have the intellectual property, contractual framework, operating systems and support infrastructure needed to manage a network of franchisees.

The distinction is important. A business may be commercially successful without being ready to franchise.

Before offering franchises, companies should assess whether their operations, finances, brand and management systems are sufficiently mature to support expansion through third parties.

A Proven and Replicable Business Model

The first question for a prospective franchisor is whether the business has a proven model.

A business that depends heavily on its founder's personal relationships, individual expertise or informal methods may struggle to reproduce its success elsewhere. Franchisees need a system that can be understood, followed and implemented without the constant involvement of the original owner.

Ideally, the business should have operated successfully for a sufficient period to establish that its products or services have sustained market demand.

The model should also be capable of being replicated across different locations. This means identifying the factors that genuinely drive profitability, including pricing, suppliers, staffing, customer acquisition, premises, technology and operating procedures.

A franchisor should be able to explain not only what makes its business successful, but how that success can be reproduced.

Brand Strength Matters

Franchisees are generally buying more than an operating system. They are also investing in the reputation and commercial value of the franchisor's brand.

A company therefore needs to consider whether its brand has sufficient strength to attract customers and franchise investors.

Brand value can come from customer loyalty, market recognition, reputation, distinctive products, service quality or a combination of these factors. However, a strong local reputation does not automatically mean a business is ready for national or international franchising.

The company should understand its target franchise markets and determine whether its brand proposition can be adapted without losing its identity.

Trademark protection is particularly important. A franchisor that allows franchisees to operate under its brand must have clear ownership and control of the relevant intellectual property.

Intellectual Property Must Be Protected

Intellectual property is one of the central assets of a franchise system. This can include trademarks, trade names, logos, copyright, designs, domain names, software, recipes, business methods and trade secrets, depending on the nature of the business.

Before franchising, the company should establish who owns these assets and whether they are adequately protected in the jurisdictions where the franchise network will operate.

Trademark registrations should be reviewed carefully, particularly where international expansion is contemplated. A franchisor may discover that its preferred brand name is unavailable or already protected by another party in a target market.

Confidential information also requires protection. Franchisees may receive access to operating methods, supplier information, pricing strategies, customer data and other commercially sensitive material.

Franchise agreements and related confidentiality provisions should therefore establish clear rules governing the use and protection of intellectual property during and after the franchise relationship.

Systems Should Not Exist Only in The Founder's Head

One of the biggest tests of franchise readiness is whether the company's operations have been properly documented. An owner may know instinctively how the business should operate, but that knowledge needs to be converted into systems that a franchisee can follow.

This can include procedures covering recruitment, training, purchasing, inventory, customer service, sales, accounting, health and safety, technology, quality control and marketing.

The more dependent the business is on undocumented knowledge, the greater the risk that different franchisees will operate differently.

A franchise system should therefore establish clear standards and measurable processes before expansion begins.

The Franchise Operations Manual

The operating manual is often one of the most important documents within a franchise system. It should translate the company's business model into practical instructions for franchisees and their employees.

Depending on the business, the manual may cover everything from opening and closing procedures to customer service standards, product preparation, branding, staff training, technology and reporting requirements.

The manual should not simply describe how the founder prefers the business to operate. It should provide a consistent operational framework that can be updated as the franchise system develops.

A franchisor should also have mechanisms for ensuring that franchisees follow the required standards.

Profitability and Financial Transparency

A business does not necessarily have to be exceptionally large before it can franchise, but it needs a credible economic model.

Potential franchisees will want to understand the investment required, expected operating costs, revenue assumptions, ongoing fees and potential returns.

The franchisor should therefore have reliable financial information demonstrating how the underlying business performs.

The economics must also work for both sides. If franchisees cannot generate sustainable returns after paying royalties, marketing contributions, rent, staff costs and other expenses, the franchise network is unlikely to remain healthy.

Franchising should not be used simply as a way to obtain upfront fees from investors or to solve cash-flow problems within the original business. A sustainable franchise model should create value for both the franchisor and its franchisees.

Support Infrastructure is Essential

A franchisor's responsibilities do not end when a franchise agreement is signed. Franchisees typically require assistance with site selection, launch planning, training, marketing, technology, procurement, operations and ongoing performance.

The franchisor must therefore have sufficient people and resources to provide that support.

This can become a significant challenge for rapidly growing businesses. A company may have the financial capacity to sell dozens of franchises but lack the personnel to train and monitor dozens of franchisees.

Growth should therefore be matched with infrastructure. The company should determine who will manage franchise recruitment, onboarding, training, field support, compliance, marketing and franchisee relations before the network expands significantly.

Franchise Agreements and Legal Structure

Once a company decides to franchise, its legal framework becomes critical. The franchise agreement should clearly define the rights and obligations of both parties. Depending on the structure and applicable law, issues can include franchise fees, royalties, territory, intellectual property rights, training, marketing contributions, supply arrangements, performance standards, renewal, transfer, termination and post-termination obligations.

The franchisor should also consider whether the franchise structure complies with the laws of each market in which it plans to operate.

Different jurisdictions can impose different requirements concerning franchise disclosure, registration, competition law, consumer protection, intellectual property, employment, taxation and dispute resolution.

A franchise model designed for one jurisdiction may therefore require adjustments before it is introduced elsewhere.

Is the Management Team Ready?

Franchising changes the nature of a business. An owner who previously managed employees and company-owned outlets may suddenly become responsible for working with independent business owners who have their own commercial interests and expectations.

This requires a different management approach. A franchisor needs the ability to select suitable franchisees, communicate standards, resolve disputes and maintain relationships across the network.

It must also be prepared to enforce its standards consistently. Allowing one franchisee to ignore brand or operational requirements can create problems for the entire network.

When Should a Business Franchise?

There is no single revenue figure, number of outlets or period of operation that automatically makes a company ready to franchise.

The better test is whether the business can demonstrate repeatability, profitability, brand value, operational discipline and scalability.

Before taking the next step, a company should be able to answer several practical questions.

Can an independent operator reproduce the business without relying on the founder? Are the company's intellectual property rights protected? Are the operating procedures documented? Does the franchisee have a realistic path to profitability? Can the franchisor provide training and continuing support? Are its contracts and legal structures ready for expansion? If the answer to these questions is no, expansion may need to wait.

Franchising is a Business Model, Not Just an Expansion Strategy

The attraction of franchising is clear: it can allow a company to expand its footprint while franchisees provide much of the capital and local management.

But the model also creates responsibilities. A company that franchises too early can damage its brand, frustrate franchisees and create legal and operational disputes. Rapid expansion without adequate systems can also make it difficult to maintain consistent customer experiences.

The strongest franchise systems are generally built on businesses that have already demonstrated that their model works and can be systematically transferred to others.

Franchise readiness is therefore less about how successful a business looks today and more about whether that success can be reproduced tomorrow.

For companies considering franchising, the objective should not simply be to sell the first franchise. It should be to build a sustainable system in which the franchisor, franchisees and customers can grow together.

A franchisee may build a profitable business, establish a loyal customer base and eventually decide it is time to sell. But unlike the owner of an independent business, a franchisee may not be free to choose its buyer.

Franchise agreements commonly contain transfer restrictions that allow franchisors to control, or at least influence, the sale or transfer of a franchise. These provisions are intended to protect the brand and ensure that new franchisees meet the standards expected across the network. For franchisees, however, they can have a direct impact on the value of the business and the ability to exit on their own terms.

The issue can arise in several ways. A franchisee may want to sell the entire business, transfer the franchise agreement to another operator, assign its contractual rights or sell shares in the company that owns the franchise. Depending on the wording of the agreement, any of these transactions could require the franchisor's prior written consent. That makes the transfer clause one of the most commercially important provisions in a franchise agreement.

Franchisors generally have a strong interest in controlling who operates under their brand. A franchise network depends on consistency in areas such as customer service, product quality, marketing, operational standards and compliance. A purchaser who lacks the necessary financial resources or management experience could create risks not only for the individual outlet but for the wider brand.

Franchising is built on a fundamental commercial bargain. The franchisor provides a recognised brand, established business model, intellectual property, training and operational support, while the franchisee contributes capital, local knowledge and the day-to-day effort required to operate the business.

In theory, the relationship is mutually beneficial. In practice, however, the negotiating positions of the two parties can be very different.

A large international franchisor may have an established agreement that is used across several jurisdictions, backed by experienced lawyers, extensive market data and considerable negotiating power. The prospective franchisee, even if commercially experienced, may have little ability to alter the core terms.

This raises an increasingly important policy question: how far should franchise law go in protecting franchisees?

Should sophisticated commercial parties be free to negotiate their own bargains, with the risks allocated according to the contract? Or should the law intervene where there is a significant imbalance in bargaining power?

The answer is not straightforward. Excessive regulation could undermine the flexibility that makes franchising attractive. Too little protection, however, could leave franchisees exposed to contractual obligations that they had little realistic opportunity to negotiate.

The Bargaining Power Problem

The starting point of the franchisee protection debate is bargaining power.

Franchise agreements are often presented as commercial contracts between independent parties. But equality on paper does not necessarily mean equality at the negotiating table.

A major franchisor may operate hundreds or thousands of outlets and have considerable experience dealing with franchise disputes, renewals, defaults and terminations. A new franchisee may be investing a substantial portion of their personal or corporate capital into a single outlet.

The franchisee may therefore face a difficult choice: accept the franchisor's standard terms or walk away from the opportunity altogether.

That does not automatically make the agreement unfair. Commercial parties routinely enter contracts with different levels of bargaining strength. Sophisticated franchisees may also have access to lawyers, accountants and financial advisers.

The policy challenge is determining when a difference in bargaining power becomes sufficiently serious to justify legal intervention.

Should Disclosure Be Mandatory?

One of the strongest arguments for franchisee protection is mandatory disclosure. Before committing significant capital, a prospective franchisee should understand what it is actually buying and what obligations it is assuming.

A robust disclosure regime could require franchisors to provide material information about the franchise system, including fees, royalties, initial investment requirements, ongoing costs, litigation history, termination provisions, renewal conditions and significant financial obligations.

Disclosure could also address the commercial realities behind the business model. For example, a franchisee may be attracted by a successful brand without fully understanding the costs of property, fit-out, staffing, technology, supply arrangements and mandatory refurbishment.

The purpose of disclosure should not be to guarantee commercial success. No law can eliminate business risk. Instead, it should ensure that the franchisee enters the relationship with sufficient information to make an informed decision.

At the same time, disclosure requirements must be proportionate. Excessive paperwork can increase compliance costs without necessarily improving decision-making.

The Question of Unfair Contract Terms

Another major issue is whether franchise agreements should be subject to stronger scrutiny for unfair contract terms.

Franchise agreements can contain extensive provisions covering everything from branding and operating procedures to supply chains, audits, intellectual property and termination.

Some restrictions are commercially necessary. A franchisor must be able to protect the consistency and reputation of its brand.

Problems arise when contractual provisions place disproportionate risks on the franchisee while preserving broad discretion for the franchisor.

For example, a clause giving one party extensive rights to alter operational requirements, impose additional costs or terminate the agreement may deserve closer scrutiny if the franchisee has little corresponding protection.

The difficulty is defining "unfair". A term that appears harsh in isolation may be commercially justified when considered alongside the franchisor's investment in the brand, training, technology and support. The law should therefore be cautious about replacing commercial judgement with regulatory judgement.

Termination: The Ultimate Source of Risk

Few contractual issues are more important to a franchisee than termination rights. A franchisee may spend years building a customer base and investing in premises, equipment, staff and local marketing. If the agreement is terminated prematurely, much of that investment may be lost.

Franchisors, however, need meaningful termination rights. A franchise system cannot function effectively if a franchisee is permitted to damage the brand, breach operational standards, misuse intellectual property or engage in serious misconduct without consequences.

The real question is whether termination should always be immediate or whether franchisees should receive an opportunity to remedy breaches.

A balanced framework could distinguish between serious breaches requiring immediate action and remediable breaches for which a reasonable cure period should normally apply.

Transparency is equally important. Franchisees should understand the circumstances in which termination can occur before they commit their capital.

The Capital Expenditure Dilemma

Capital expenditure is another area where franchisee protection becomes particularly complicated. Franchisors may require franchisees to refurbish outlets, replace equipment, adopt new technology or upgrade premises to maintain brand standards.

From the franchisor's perspective, these investments may be essential. Consumer expectations change, competitors modernise and technology evolves.

For a franchisee, however, an unexpected refurbishment requirement can transform an apparently profitable business into a heavily capital-intensive operation.

The law could therefore encourage greater transparency around foreseeable capital expenditure. Franchise agreements could identify expected investment cycles and provide reasonable notice of major upgrades.

But regulation should not prevent legitimate business development. A franchise brand that cannot require its network to evolve may eventually become commercially obsolete.

Who Controls the Marketing Fund?

Marketing contributions can also create tension. Franchisees may be required to contribute a percentage of revenue to a central marketing fund. The rationale is straightforward: collective advertising can strengthen the brand and benefit the entire network.

The concern is whether franchisees can determine how those funds are spent and whether they receive sufficient information about expenditure.

A reasonable regulatory approach may focus less on controlling the amount of the contribution and more on transparency and accountability.

Franchisees could be entitled to information about how the fund is administered, the categories of expenditure and whether the franchisor uses the fund for purposes unrelated to network marketing. This would preserve the franchisor's ability to manage the brand while giving franchisees greater confidence that their contributions are being used for their intended purpose.

Renewal Should Not Be an Afterthought

For many franchisees, the real value of the business emerges over time. They build a customer base, develop employees and establish a presence in the local market. Yet the end of the initial franchise term can create significant uncertainty.

A franchisee may have invested heavily in a business only to discover that renewal depends on conditions that were not sufficiently clear at the beginning.

Should the law provide a renewal right? There are arguments on both sides.

A mandatory renewal right could protect franchisees from losing established businesses without adequate justification. But it could also restrict a franchisor's ability to restructure its network, introduce new formats or replace underperforming operators.

A more balanced approach may require renewal conditions to be clearly disclosed from the outset, rather than guaranteeing renewal in every case.

Should Franchisors Owe a Duty of Good Faith?

The concept of good faith has become an important part of the wider debate over commercial relationships.

A good-faith obligation could prevent parties from exercising contractual rights in an abusive, dishonest or opportunistic manner.

For franchise relationships, this could be particularly significant because the parties remain commercially interdependent throughout the life of the agreement.

A franchisor may technically possess a contractual right to take a particular action, but exercising that right purely to obtain an unexpected commercial advantage could raise questions about fairness.

Yet good faith should not become a vague mechanism for rewriting contracts. If every difficult commercial decision can be challenged as "bad faith", contractual certainty suffers.

Any statutory good-faith obligation should therefore be carefully defined, particularly in sophisticated commercial relationships.

Should Governments Intervene?

This brings the debate to its central question: how much government intervention is appropriate? There are broadly three possible approaches.

The first is freedom of contract. Under this model, sophisticated parties should generally be bound by the agreements they negotiate. Legal intervention should be limited to fraud, illegality and clearly established forms of contractual misconduct.

The second is targeted protection. Governments could impose disclosure requirements, regulate particular unfair practices and establish minimum standards for termination, renewal and transparency without controlling the commercial bargain itself.

The third is prescriptive regulation, under which legislation would impose extensive mandatory terms on franchise relationships. The middle approach may offer the most sustainable solution.

Franchising is too diverse for a one-size-fits-all regulatory model. A small local franchise and a sophisticated multinational franchise network may have completely different risk profiles.

The law should therefore focus on transparency, informed consent and protection against genuinely abusive practices rather than attempting to guarantee commercial outcomes.

Protecting Franchisees Without Weakening Franchising

There is also an important danger in over-regulation. Franchising depends on investment. If franchisors believe that regulations make it excessively difficult to enforce standards, terminate problematic relationships, recover costs or restructure their networks, they may become less willing to franchise. That could ultimately reduce opportunities for entrepreneurs.

At the same time, assuming that every franchisee is a sophisticated investor capable of protecting themselves ignores the reality of many franchise relationships.

A franchisee may be commercially experienced but still have substantially less negotiating power than an international brand with a standardised legal and operational system.

The objective of franchise regulation should therefore not be to make franchisees risk-free. Entrepreneurs must continue to bear genuine business risk.

The objective should be to ensure that those risks are visible, understood and allocated through a reasonably fair contractual process.

A More Balanced Franchise Model

The future of franchise regulation is likely to revolve around balance rather than choosing between complete contractual freedom and heavy government control.

A sensible framework could combine mandatory pre-contractual disclosure, greater transparency around fees and marketing funds, clearer termination procedures, reasonable notice for significant capital expenditure and safeguards against genuinely abusive contractual practices.

It could also encourage sophisticated franchisees to obtain independent legal and financial advice before signing.

Ultimately, franchise law should recognise an important distinction: protecting a franchisee from unfair conduct is not the same as protecting a franchisee from commercial failure.

A franchisee who enters a properly disclosed agreement, understands the investment required and takes an informed commercial risk should ordinarily bear the consequences of that risk.

But where critical information is withheld, contractual rights are exercised opportunistically or a franchisee is subjected to obligations that were not reasonably foreseeable, the law has a stronger case for intervention.

The franchisee protection debate is therefore unlikely to be settled by asking whether franchisors or franchisees deserve more protection.

The better question is whether the legal framework creates a fair and transparent commercial relationship while preserving the flexibility that allows franchising to grow.

That balance will become increasingly important as franchise networks expand across borders, investments become larger and franchise agreements become more complex.

For policymakers and courts, the challenge is clear: protect the weaker party where necessary, but do not regulate away the commercial freedom that makes franchising work.

Dr. Sunil Ambalavellil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.

Artificial intelligence is rapidly moving from an experimental technology to an everyday business tool. Franchise networks are no exception. Franchisors are using AI to create advertising campaigns, analyse customer behaviour, forecast demand, monitor performance and streamline operations. Franchisees, meanwhile, are turning to generative AI to prepare social media content, respond to customers, analyse sales and reduce administrative costs.

But the rapid adoption of AI creates a legal question that many franchise agreements were never designed to answer: who bears the risk when artificial intelligence makes a mistake?

A franchise agreement traditionally establishes the rights and obligations of two parties operating under a common brand. It deals with matters such as intellectual property, territory, marketing, quality standards, fees, confidentiality, data and termination. AI now cuts across almost all of these areas.

A franchisee may use an AI system to generate an advertisement containing a false claim. A franchisor may require franchisees to use a centralised AI platform that processes customer information. An automated system may incorrectly identify a franchisee as non-compliant. Or an AI-generated marketing campaign may inadvertently reproduce material belonging to a third party.

Without clear contractual rules, determining responsibility could become complicated.

Who Owns AI-Generated Marketing Material?

One of the most immediate issues concerns intellectual property. Franchise networks depend heavily on marketing material, including advertisements, photographs, videos, social media posts, website content and promotional campaigns. Increasingly, some of this material may be produced or assisted by generative AI. The franchise agreement should therefore establish who owns, controls and may use AI-assisted content.

This is not necessarily straightforward. The legal treatment of AI-generated works can differ between jurisdictions, particularly where human involvement in creating the material is limited. There may also be uncertainty about whether an AI-generated image, text or design incorporates material derived from third-party works.

A franchisor may want all marketing content created for the brand to belong to, or be controlled by, the franchisor. Conversely, a franchisee may argue that it should retain rights over material it independently develops and pays for.

The agreement should distinguish between brand-owned content, franchisee-created content and AI-generated or AI-assisted content.

It should also specify whether franchisees are permitted to modify centrally approved AI-generated material and whether they must obtain approval before publishing it.

Can Franchisors Mandate AI Systems?

Franchisors generally seek consistency across their networks. They may therefore decide that franchisees must use an approved AI-powered customer relationship management system, marketing platform, inventory tool or compliance system.

From the franchisor's perspective, a centralised system can improve efficiency and produce more consistent results. From the franchisee's perspective, however, mandatory technology can create additional costs and raise questions about control and autonomy.

A franchise agreement should clearly establish whether the franchisor can introduce new AI systems during the franchise term. This is particularly important where the original agreement was signed before AI became an important part of the business model. A broadly drafted technology clause may give the franchisor considerable flexibility, but franchisees may still want protection against unreasonable costs or disruptive technology changes.

The agreement could address issues such as implementation costs, subscription fees, training, system upgrades, technical support and the circumstances in which a franchisee may use an alternative system.

Who is Liable for an AI-Generated False Advertising Claim?

AI can produce content quickly, but speed does not remove legal responsibility. Suppose a franchisee asks an AI system to create an advertisement claiming that a restaurant's product is "the healthiest choice" or that a service is "guaranteed" to produce a particular result. If the statement is inaccurate, the resulting regulatory, consumer or reputational consequences could fall on the franchisee, the franchisor or potentially both, depending on the circumstances.

This creates a difficult contractual question. A franchisor may argue that the franchisee was responsible because it independently generated and published the material. The franchisee, however, may argue that it was using an AI tool supplied or recommended by the franchisor. Franchise agreements should therefore identify responsibility for AI-generated marketing and establish approval procedures.

Where the franchisor provides the AI platform or centrally generated content, the contract could set out the extent of the franchisor's responsibility for reviewing and approving material. Where the franchisee independently uses an external AI platform, the franchisee could remain responsible for ensuring that its output complies with brand standards, advertising laws and applicable regulations. Ultimately, AI should not become a contractual excuse for inaccurate advertising.

Who Owns the Customer Data?

Data is another major area of risk. Franchise businesses routinely collect customer names, contact details, purchasing histories, preferences and behavioural information. AI systems can use this information to identify trends, personalise marketing and predict customer behaviour.

But who owns that data? The answer may depend on the applicable law and the contractual structure between the parties. More importantly, the franchise agreement should clearly define the rights and responsibilities of each party.

Questions should include:

• Who collects the customer information?
• Who determines the purposes for which it is processed?
• Can the franchisor access franchisee customer databases?
• Can customer information be transferred across borders?
• Can AI systems use customer data to train or improve models?
• How long may the data be retained?
• What happens to the data when the franchise agreement ends?

These issues become particularly important when a franchise network operates across several countries, each with different data protection requirements.

A franchise agreement should not simply state that "the franchisor owns all customer data". It should also address lawful processing, security, access rights, retention, international transfers and responsibilities in the event of a data breach.

Can Franchisees Use Generative AI Independently?

Franchisees increasingly have access to inexpensive AI tools that can create marketing copy, images, videos, customer responses and business reports.

The problem for franchisors is that unrestricted use can undermine brand consistency. A franchisee could unknowingly create an AI-generated advertisement featuring an inaccurate product description, use an image that creates an intellectual property dispute or publish content that conflicts with the franchisor's brand guidelines. The franchise agreement should therefore establish an AI acceptable-use policy.

It could identify approved tools, prohibited uses and circumstances requiring prior approval. It could also prohibit franchisees from entering confidential business information, trade secrets or sensitive customer information into publicly available AI systems.

Training should form part of the framework. Franchisees and their employees need to understand not only how to use AI effectively, but also its limitations.

Can AI Monitor Franchisee Compliance?

AI also gives franchisors unprecedented opportunities to monitor franchise operations. An AI system could analyse sales figures, customer reviews, employee records, inventory data and digital marketing activity to identify possible breaches of franchise standards. This may improve compliance, but it also introduces a new layer of legal and commercial risk.

What happens if the system gets it wrong? An automated tool might incorrectly conclude that a franchisee has breached a contractual requirement. If that conclusion triggers a warning, financial penalty or termination process, the franchisee may challenge the decision.

The agreement should therefore make clear whether AI-generated findings are merely alerts for human investigation or can themselves trigger contractual consequences.

A strong approach would require human review before serious enforcement action is taken. This preserves the benefits of automated monitoring while reducing the risk of decisions based on inaccurate or incomplete data.

What Happens When AI Makes a Commercially Damaging Decision?

The most difficult disputes may arise when AI makes decisions that are technically permitted but commercially harmful. Imagine an AI system recommends reducing inventory at a particular franchise location because historical data suggests weak demand. A sudden local event then produces an unexpected surge in customers, leaving the franchisee unable to meet demand.

Who should bear the resulting loss? Consider an AI pricing system that automatically adjusts prices across hundreds of franchise outlets. If the algorithm adopts a pricing strategy that reduces sales, alienates customers or creates regulatory concerns, it may be difficult to determine whether the franchisor, the franchisee or the technology provider should be held responsible. Franchise agreements should therefore address the allocation of risk associated with automated decision-making.

They should identify which decisions can be automated, which require human approval and who is responsible for monitoring AI systems.

Building AI Clauses into Franchise Agreements

AI should no longer be treated simply as a technology issue. It is becoming a contractual, intellectual property, data protection, compliance and risk-management issue.

Future franchise agreements are likely to contain dedicated AI provisions covering several areas.

First, the agreement should define what constitutes an approved AI system and establish rules governing its use.

Second, it should address ownership and licensing of AI-generated or AI-assisted content. Third, it should allocate responsibility for inaccurate, unlawful or misleading AI-generated material. Fourth, it should establish strict rules for entering confidential information and customer data into AI platforms.

Fifth, it should address cybersecurity, data breaches and third-party AI providers.

Sixth, it should establish audit and monitoring rights while ensuring that automated compliance systems do not replace appropriate human oversight.

Finally, the agreement should provide flexibility. AI technology will continue to change rapidly, and a clause drafted today should not become obsolete when a new generation of AI tools emerges.

The Franchise Agreement of the Future

Franchising has always been built around a balance between control and independence. The franchisor protects the brand and establishes standards, while the franchisee operates the individual business and assumes many of the day-to-day commercial risks. AI complicates that balance.

When the franchisor supplies the technology, controls the data and sets the algorithmic rules, it may have greater responsibility for the consequences. When the franchisee independently chooses and operates an AI tool, the risk may shift towards the franchisee. But the answer will rarely be as simple as assigning all AI risk to one party.

The better approach is to identify the specific technology, the decision being made, the data being processed and the party exercising control.

AI may ultimately make franchising more efficient, more data-driven and more scalable. But it can also create new disputes over intellectual property, advertising, privacy, compliance and liability. The franchise agreement must therefore evolve alongside the technology.

The central question is no longer whether a franchise business will use AI. It is whether the parties have agreed, in advance, who owns its output, who controls its data and who pays when the algorithm gets it wrong.

Dr. Sunil Ambalavellil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.

Franchising has become an important route for international and regional brands seeking to expand in the United Arab Emirates. From restaurants and retail outlets to education, healthcare, fitness and professional services, the franchise model allows businesses to enter new markets without having to own and operate every outlet themselves.

Yet there is an interesting legal gap at the heart of this growing market: the UAE does not have a dedicated federal franchise law.

That does not mean franchising is unregulated. Far from it. Franchise relationships are affected by a combination of commercial agency legislation, civil and commercial contract principles, competition law, consumer protection rules, intellectual property legislation, company law and, depending on the structure, free-zone regulations.

The result is a framework that can provide considerable contractual flexibility, but which may also leave important questions to be determined by the wording of individual franchise agreements and the way the relationship is structured.

As the UAE continues to position itself as an international business and investment hub, the question is therefore becoming more relevant: would a dedicated franchise statute strengthen the market, or would it create unnecessary regulation around a system that already works?

A Legal Framework Built Around Multiple Laws

The first point to understand is that franchising in the UAE does not operate within one comprehensive statute. Current legal analysis identifies the Federal Law No. 3 of 2022 regulating commercial agencies, the Civil Transactions Law, the Commercial Transactions Law, trademark and other intellectual property legislation, competition law and consumer protection legislation among the key laws that can affect franchise arrangements.

This framework reflects the fact that a franchise is not simply a licence to use a brand. It is usually a combination of intellectual property rights, operational know-how, business methods, quality standards, supply arrangements, marketing obligations, and continuing commercial support. The franchise agreement therefore becomes particularly important.

It normally sets out the territory, term, fees, royalties, marketing contributions, intellectual property rights, training, supply requirements, operating standards, renewal, termination, post-termination obligations, confidentiality and dispute resolution.

The flexibility of this contractual model is one of the UAE's attractions. But it can also produce an imbalance where a sophisticated international franchisor negotiates against a smaller or less experienced franchisee. That is where the argument for a dedicated law begins.

Commercial Agency: The Line That Franchisors Cannot Ignore

One of the most important issues is whether a franchise arrangement could fall within the UAE's commercial agency regime. Federal Law No. 3 of 2022 defines a commercial agency broadly, covering representation of a principal by an agent under an agreement involving agency, distribution, sale, offer or concession, or the provision of goods or services in the UAE in return for commission or profit. This matters because a franchise agreement can contain elements resembling distribution, agency or concession arrangements.

The legal consequences can be significant where an arrangement is registered as a commercial agency. The Commercial Agencies Law provides a specific statutory framework, including provisions concerning the relationship between principals and agents, territory and disputes. The law also provides that commercial agency contracts are considered to be in the common interest of the contracting parties and gives UAE courts jurisdiction over disputes concerning such contracts.

For franchisors, the issue is therefore not merely whether an agreement is labelled a "franchise agreement". Its substance and structure matter.

A dedicated franchise law could provide a clearer test for distinguishing a franchise from a commercial agency, reducing uncertainty over which statutory regime applies.

Contract Law Remains the Foundation

For franchise arrangements outside the commercial agency regime, general principles of UAE civil and commercial law remain central. This places considerable emphasis on the negotiated contract.

That can be positive. International franchisors often need sophisticated agreements capable of dealing with brand standards, technology, intellectual property, supply chains and changing business models. A rigid statutory framework may not always accommodate those requirements.

However, contractual freedom also creates questions about bargaining power. A franchisee may invest heavily in premises, staff, equipment and marketing based on the expectation of operating a particular brand for several years. If the agreement contains broad termination rights, restrictive renewal conditions or substantial post-termination obligations, the franchisee's investment may be exposed.

Conversely, a franchisor must be able to protect its brand from a franchisee whose performance damages reputation or breaches operational standards.

A well-designed franchise statute would therefore need to strike a balance rather than simply favour one side.

Competition Law and Franchising

Competition law is another increasingly important part of the picture. Federal Decree-Law No. 36 of 2023 regarding the regulation of competition is intended to protect and enhance competition, combat monopolistic practices and prevent conduct that distorts, restricts or prevents free competition. Its scope extends to economic activities in the UAE and certain conduct outside the UAE that affects competition within the country.

This is relevant to franchise arrangements because franchisors frequently impose restrictions relating to territories, suppliers, pricing, customers, online sales and competing businesses.

Such restrictions can have legitimate commercial purposes. A franchisor may need to maintain uniform standards, protect confidential know-how or prevent free-riding between franchisees. But restrictions cannot simply be assumed to be lawful because they appear in a franchise agreement.

The UAE's competition regime has also recently become more significant with Cabinet Resolution No. 59 of 2026 concerning the executive regulations of the Competition Law, which took effect on July 30, 2026.

A future franchise law should therefore work alongside competition legislation rather than create a separate regime that conflicts with it.

Consumer Protection Does Not Stop at the Franchise Agreement

The ultimate customer is not a party to the franchise agreement, but consumer protection law can nevertheless have a direct impact on the franchise network. Federal Decree-Law No. 5 of 2023 amended the Federal Law No. 15 of 2020 on Consumer Protection. Among other matters, the framework addresses quality, safety, pricing, consumer data and information provided to consumers. Suppliers must also meet specific invoicing and consumer information requirements.

For franchisors, this raises a practical question: who carries responsibility when a franchise outlet fails to meet the brand's standards?

A franchise law could clarify responsibilities between franchisor and franchisee without diminishing the consumer's statutory rights. This would be particularly valuable for businesses operating across multiple emirates, where a consumer may see the same brand as a single business even though individual outlets are owned by different franchisees.

Intellectual Property is the Heart of the Franchise Model

Without intellectual property protection, there is little meaningful franchise system to protect. The franchisor typically grants the franchisee rights to use trademarks, logos, trade names, copyrighted material, operating manuals, recipes, designs, software and other proprietary material.

The UAE's Federal Decree-Law No. 36 of 2021 on Trademarks provides the principal trademark framework, while other legislation protects different categories of intellectual property. The Ministry of Economy and Tourism identifies trademark and industrial property legislation as part of the country's broader IP framework.

A dedicated franchise statute could strengthen this area by expressly recognising the licensing and controlled use of franchise intellectual property.

It could also establish clearer rules concerning confidentiality, trade secrets, know-how and the return or destruction of proprietary materials after termination.

This would be particularly important as franchises increasingly depend on technology, digital platforms, customer databases and proprietary business systems rather than merely physical branding.

Foreign Investment Has Changed the Equation

The UAE's foreign investment reforms have also altered the context in which franchising operates. The country's corporate framework permits 100 per cent foreign ownership for many mainland activities, although strategic activities remain subject to specific restrictions and approvals. The UAE Government states that foreign investors can own up to 100 per cent of companies in eligible activities.

This reduces one of the historical reasons international businesses relied on local partners or particular agency structures. For franchising, it means a foreign brand has more choices in deciding how to establish its presence: direct investment, a subsidiary, a branch where permitted, a joint venture or a franchise arrangement.

A modern franchise law should recognise this changed investment landscape rather than be built around older assumptions about foreign ownership.

Free Zones Add Another Layer

The UAE's free zones create further complexity. Free-zone businesses benefit from simplified establishment procedures and, generally, full foreign ownership. However, the rules and licensing requirements can vary between individual free zones.

For a franchisor, the question is not simply where the franchise company is incorporated. It is also where the franchise outlets operate and whether the business is supplying the UAE mainland.

A franchise law could provide useful clarity by establishing baseline federal principles applicable to franchise relationships while preserving the regulatory autonomy of individual free zones. That could reduce uncertainty without eliminating the flexibility that makes free zones attractive.

Franchise Disclosure: Perhaps the Biggest Missing Piece

One of the strongest arguments for dedicated legislation concerns pre-contractual disclosure. There is currently no general UAE franchise disclosure regime requiring a franchisor to provide a prospective franchisee with a standardised disclosure document before signing.

That means the quality and extent of information available to a prospective franchisee can depend heavily on negotiation and due diligence.

A disclosure regime could require franchisors to provide information about the business, ownership, litigation history, intellectual property, fees, financial commitments, termination provisions, existing franchise network and material risks. Such a requirement would not necessarily prevent a franchisee from making a bad investment. But it could make the decision more informed.

For a market seeking sophisticated international investors, transparency can be an advantage rather than a burden.

Should Franchisees Receive Greater Statutory Protection?

This is perhaps the most sensitive question. A franchisee is an independent business owner, not an employee. It takes commercial risk and should be expected to conduct due diligence before investing.

At the same time, the franchisor often controls the brand, business model, operating standards and contractual framework. This can create a significant imbalance in bargaining power. A franchise statute could therefore introduce targeted protections without turning franchisees into protected consumers.

Possible measures could include reasonable notice requirements before termination, minimum standards for renewal, restrictions on unfair contractual terms, protection for franchisee investments in certain circumstances and clearer rules governing post-termination restrictions.

However, excessive protection could discourage international brands from entering the UAE. The objective should be balance, not regulation for its own sake.

Dispute Resolution Needs Greater Predictability

Franchise disputes can be particularly complex because they may involve unpaid royalties, trademark rights, confidential information, supply obligations, termination, territorial restrictions and claims for damages.

The agreement should therefore carefully address governing law, jurisdiction, arbitration, emergency relief, confidentiality and enforcement.

The UAE has developed into a major arbitration and dispute-resolution hub, while the federal courts and specialist financial-centre jurisdictions provide different options depending on the structure of the transaction.

A franchise statute could establish clearer principles without preventing sophisticated parties from choosing arbitration or another agreed dispute-resolution mechanism where legally permissible.

So, Does the UAE Need a Franchise Law?

The answer may be yes — but not necessarily a highly prescriptive one.

The UAE's existing framework has helped franchising develop without imposing a separate regulatory regime. Its flexibility is valuable, particularly for sophisticated international businesses.

But the absence of a dedicated statute also means that important franchise-specific questions are dispersed across different areas of law. A carefully drafted franchise law could fill those gaps.

It could define what constitutes a franchise; distinguish franchising from commercial agency and distribution; introduce proportionate pre-contractual disclosure; establish basic standards for termination and renewal; recognise franchisee investments; clarify intellectual property and confidentiality obligations; address competition concerns; and provide a coherent framework for dispute resolution. It should also preserve contractual freedom for commercially sophisticated parties.

The UAE has repeatedly demonstrated a willingness to update its commercial laws as its economy evolves. The recent reforms in company ownership, competition regulation, intellectual property and commercial agencies show that the legal environment is already moving towards greater sophistication.

Franchising is now sufficiently important to merit the same attention. The real question, therefore, may no longer be whether the UAE can operate without a franchise law. It clearly can.

The more important question is whether a dedicated framework could make the market more transparent for franchisees, more predictable for franchisors and more attractive to international brands. If designed carefully, the answer could be yes.

For the UAE, the opportunity is not to regulate franchising out of existence, but to create a legal framework that reflects the sophistication of the market it has already become.

Dr. Sunil Ambalavellil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.

Franchising has traditionally been built on a relatively straightforward proposition: a recognised brand provides the business model, systems and intellectual property, while an independent franchisee invests capital and operates the business within an established framework. By 2030, that formula is likely to look considerably different.

Technology is already reshaping how franchise businesses attract customers, manage employees, monitor performance and maintain consistency across locations. Artificial intelligence (AI), automation, digital platforms, data analytics and virtual business models are reducing the importance of physical premises in some sectors while increasing the importance of technology, intellectual property and digital infrastructure.

At the same time, franchisees are becoming more sophisticated. They increasingly expect transparency, stronger support, faster access to data and greater flexibility from franchisors. Regulators, meanwhile, are paying closer attention to data protection, artificial intelligence, consumer protection, employment practices, environmental standards and cross-border business structures.

The franchise of 2030, therefore, may be less about simply replicating a physical outlet and more about managing a connected commercial ecosystem.

AI Will Become Part of the Franchise Operating System

Artificial intelligence is likely to become one of the most influential technologies in franchising over the next decade.

Franchisors are already exploring AI for customer service, marketing, demand forecasting, inventory management, recruitment and business analytics. By 2030, many of these functions could become embedded into standard franchise systems.

An AI-enabled franchise could automatically analyse customer behaviour, identify changing purchasing patterns, forecast demand and recommend inventory levels. Generative AI could assist franchisees with marketing campaigns, social media content, customer communications and internal documentation.

AI could also change the way franchisors support franchisees. Instead of relying exclusively on human consultants or regional managers, franchisees could have access to intelligent digital assistants capable of answering operational questions, explaining procedures and identifying potential compliance issues.

However, AI will introduce new legal and commercial questions. Who owns AI-generated content? Who is responsible when an automated recommendation causes a financial loss? How should customer data be processed? Can a franchisor require franchisees to use a particular AI system? Franchise agreements will increasingly need to address these issues.

Automation Will Change the Economics of Franchising

Automation is likely to reduce the number of routine tasks that require human intervention. Retail, hospitality, food service, logistics, healthcare and other sectors are already experimenting with automated ordering, digital payments, robotic systems, smart inventory management and AI-powered customer service.

For franchisees, this could mean lower operating costs and more consistent service delivery. For franchisors, automation could make it easier to standardise operations across hundreds or thousands of locations.

But automation may also alter the traditional franchise investment model. A franchise that once required a large team and extensive premises could potentially operate with fewer employees and a smaller physical footprint. This could lower the entry barrier for some franchisees while creating new technology and investment requirements.

The question will no longer simply be whether a franchisee can afford the premises, equipment and staff. It may also be whether the franchisee can afford, implement and maintain the technology required to operate the business.

The Rise of the Digital Franchise

The conventional franchise model is closely associated with physical locations. The digital franchise could challenge that assumption.

Digital franchises can operate through websites, mobile applications, e-commerce platforms, online education systems, digital marketplaces and other technology-enabled channels. In some cases, the franchisee may have no traditional shopfront at all.

This opens franchising to business models that were previously difficult to franchise. A digital education platform, online consultancy, specialised e-commerce business or technology service could potentially be replicated across territories without establishing conventional outlets.

The advantage is scalability. A franchisor may be able to expand into new markets without the substantial property and infrastructure costs associated with physical expansion.

But digital franchising also creates new questions around territory. If a franchisee has exclusive rights to a particular geographical area, what happens when customers from that territory purchase directly from the franchisor's website? Can another franchisee advertise digitally to the same customers? Who owns online leads? Traditional territorial clauses may therefore require significant revision.

Data Will Become a Core Franchise Asset

Data could become as valuable to a franchise network as its trademarks and operating manuals. Customer purchasing patterns, sales performance, inventory data, employee information, marketing analytics and location-based information can provide franchisors with a detailed picture of how the network is performing.

Data-driven decision-making could help identify underperforming outlets, optimise pricing, forecast demand and determine where new locations should be established. However, greater reliance on data also creates greater legal responsibility.

Franchise agreements will need to establish who owns or controls different categories of data, who can access it, how long it can be retained and what happens when the franchise relationship ends.

Data protection laws will also become increasingly important, particularly for international franchise networks operating across multiple jurisdictions.

Virtual Brands Could Redefine the Franchise Outlet

Virtual brands and delivery-only concepts are another development likely to gain importance by 2030. A single commercial kitchen could potentially prepare food for several brands operating through delivery platforms, without each brand requiring a separate physical restaurant.

This creates a fundamentally different franchise proposition. The franchisee may be investing in access to multiple digital brands, recipes, systems and platforms rather than a traditional restaurant identity.

For franchisors, virtual brands can provide a relatively low-cost route to market expansion. For franchisees, they can create opportunities to maximise existing infrastructure.

The legal framework, however, will need to keep pace. Brand ownership, licensing, quality control, platform commissions, delivery responsibilities, customer complaints and intellectual property protection will all require careful contractual treatment.

Home-Based Franchises Will Expand the Franchisee Pool

The growth of remote working and digital commerce is also likely to encourage more home-based franchise concepts.

Some professional services, education businesses, consultancy models, technology services and specialised consumer services can already be operated without conventional commercial premises.

Home-based franchising can reduce initial capital requirements and make entrepreneurship accessible to a wider group of people.

For franchisors, it can provide a faster and potentially less expensive method of network expansion.

Nevertheless, home-based businesses may create particular regulatory issues involving zoning, licensing, insurance, employment, data security and customer visits. Franchise systems will need to distinguish between the flexibility of working from home and the legal obligations attached to operating a business from residential premises.

Subscription Models Could Create Recurring Franchise Revenue

The traditional franchise model often depends heavily on individual transactions. Subscription businesses introduce a different approach. Customers may pay a recurring monthly or annual fee for products, services, memberships or access to a platform.

For franchisees, recurring revenue can make income more predictable and improve customer retention. For franchisors, subscription models can create stronger relationships with customers and provide valuable behavioural data.

But subscriptions also bring consumer-protection considerations. Cancellation rights, automatic renewals, pricing changes, refunds and marketing disclosures will need to be managed carefully.

The franchise agreement may also need to determine how recurring revenue is allocated between franchisor and franchisee, particularly where customers are acquired through a central digital platform.

ESG Will Move From Marketing to Compliance

Environmental, social and governance (ESG) considerations are likely to become increasingly significant in franchising.

Franchisors may introduce requirements concerning energy consumption, waste management, sustainable packaging, responsible sourcing, employment practices, diversity, ethical supply chains and corporate governance.

For large international networks, ESG requirements could become part of the franchise operating manual and audit process rather than simply a voluntary corporate initiative.

This may create tensions where franchisees operate in markets with different regulatory requirements or economic conditions.

A franchisor will need to decide which ESG standards are mandatory across the entire network and which can be adapted locally.

The franchise agreement may also need to establish what happens if a franchisee fails to meet specified sustainability standards.

Cross-Border Franchising Will Become More Legally Complex

International expansion will remain one of the major attractions of franchising. However, cross-border franchising is unlikely to become legally simpler.

Franchisors operating internationally must navigate differences in franchise disclosure requirements, competition law, intellectual property, employment law, taxation, foreign investment rules, data protection and consumer protection.

Digital operations add another layer of complexity because a business may serve customers in a jurisdiction without maintaining a traditional physical presence there.

By 2030, international franchise networks may therefore rely increasingly on sophisticated legal and technology systems to identify regulatory requirements before entering a new market.

A single global franchise agreement may not be sufficient. Localisation of contracts, compliance procedures and operating standards could become an essential part of international expansion.

Franchisee Expectations Will Change

Perhaps the biggest transformation will not be technological but commercial. Tomorrow's franchisees are likely to expect more from franchisors.

They may demand sophisticated analytics, transparent financial information, faster support, digital marketing assistance, technology integration and greater participation in strategic decisions.

The traditional relationship in which the franchisor dictates the system and the franchisee follows it may increasingly give way to a more collaborative model.

This does not mean franchisors will surrender control. Brand consistency will remain fundamental to franchising. But successful franchisors may increasingly recognise that franchisees are business partners with valuable local knowledge rather than simply operators of a prescribed system.

Franchisee advisory councils, digital feedback systems and data-sharing arrangements could become more common.

Technology-Driven Compliance Will Become Essential

Compliance is likely to become one of the most technology-intensive aspects of franchising. Instead of relying primarily on periodic inspections, franchisors could use real-time dashboards to monitor sales, customer complaints, employee records, health and safety indicators, inventory and other operational metrics.

AI could identify unusual patterns and flag potential breaches before they become serious problems.

Digital contract-management systems could track renewal dates, reporting obligations, insurance requirements and other contractual milestones.

Technology, however, should not become a substitute for legal judgment. Automated compliance systems are only as effective as the rules, data and oversight behind them.

Franchise networks will need clear accountability mechanisms to ensure that technology is being used responsibly.

The Franchise Agreement of 2030

The franchise agreement itself is likely to evolve substantially. Traditional provisions covering territory, fees, royalties, intellectual property, quality standards, termination and dispute resolution will remain important. But they will increasingly be supplemented by provisions dealing with AI, data ownership, cybersecurity, digital platforms, technology upgrades, ESG standards and automated decision-making.

Technology licences may become as important as trademark licences. Data rights may sit alongside intellectual property rights. Cybersecurity obligations may become as important as physical security requirements.

Franchise agreements may also need mechanisms allowing franchisors to introduce new technologies without renegotiating the entire contract every time the operating system changes.

That raises an important balance-of-power question: how much technological change can a franchisor impose on a franchisee before the additional investment becomes commercially unreasonable?

Adaptability Will Define the Winning Franchise

By 2030, there may be no single model of franchising. Some businesses will continue to rely on traditional physical outlets. Others will operate through home-based franchisees, digital platforms, virtual brands or hybrid structures. Many will combine several models. What they are likely to share is a greater dependence on technology, data and adaptable systems.

The strongest franchise brands of the future may therefore not necessarily be those with the largest number of outlets. They may be those capable of adapting their business model while maintaining brand consistency, legal compliance and franchisee profitability.

For franchisors, the challenge will be to innovate without undermining the contractual and commercial foundations of the franchise relationship. For franchisees, the challenge will be to choose systems that offer not only a strong brand today but also the technological capacity to remain competitive tomorrow.

Franchising has always been about replicating success. In the next decade, it may become increasingly about replicating adaptability.

The franchise model of 2030 will therefore be more digital, data-driven, automated and interconnected. But technology alone will not determine its success. The most resilient franchise networks will be those that combine innovation with sound contracts, responsible governance, effective compliance and a genuine understanding of what modern franchisees and customers expect.

The future of franchising may not be about replacing the traditional model. It will be about rebuilding it for a world in which the boundaries between physical businesses, digital platforms, technology and intellectual property are becoming increasingly difficult to separate.

Dr. Sunil Ambalavellil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.

Franchising has become one of the most effective ways for businesses to expand across borders without committing the capital required to build and operate every outlet themselves. For franchisees, it offers access to an established brand, business model, intellectual property, training and operational support.

But the same structure creates an inherent imbalance: the franchisor usually controls the brand, systems, information and contractual terms, while the franchisee commits capital and assumes much of the commercial risk. That imbalance has encouraged governments around the world to regulate franchising in very different ways.

There is no single global model. The US relies heavily on mandatory pre-sale disclosure. Australia has developed an extensive statutory framework governing disclosure, cooling-off rights, termination and dispute resolution. The UK has largely left franchising to general contract, competition and commercial law. Across the EU, competition rules play a particularly important role.

The UAE similarly has no standalone federal franchise statute, leaving most relationships to general commercial and contractual principles, although commercial agency legislation can become significant in certain structures. India remains largely contract-driven, while countries such as China have adopted specific franchise legislation and registration requirements.

For international franchisors, therefore, a franchise agreement that works in one jurisdiction cannot simply be exported unchanged into another.

The US: Disclosure at the Heart of Franchise Regulation

The US remains one of the world's most developed franchise markets and one of the clearest examples of a disclosure-based regulatory system.

Under the Federal Trade Commission's Franchise Rule, a franchisor must provide prospective franchisees with a Franchise Disclosure Document (FDD). The FDD contains 23 prescribed categories of information covering matters such as the franchisor's business experience, litigation and bankruptcy history, initial and continuing fees, investment requirements, restrictions, financing, intellectual property, obligations of the franchisee and franchisor, financial performance representations and details of existing and former franchisees.

The prospective franchisee must generally receive the FDD at least 14 days before signing the franchise agreement or paying money to the franchisor or its affiliate.

The US model is therefore built around an important principle: the franchisee should receive material information before making an irreversible investment decision.

The federal framework is supplemented by state laws. Several states impose additional disclosure, registration or relationship requirements. Some also provide franchisees with statutory protections relating to termination, non-renewal, transfers and good faith.

The result is a system in which due diligence is not merely a commercial recommendation. It is closely connected to the legal architecture of franchising.

Australia: One of the World's Strongest Franchisee-protection Regimes

Australia goes considerably further in regulating the relationship itself. The Franchising Code of Conduct establishes detailed obligations governing disclosure, contracting, termination, dispute resolution and other aspects of the franchise relationship. The current code was introduced on April 1, 2025, with additional rules applying from November 1, 2025.

A prospective franchisee must receive an information statement within seven days of expressing interest and before receiving other franchise documents. The franchisor must generally then provide the disclosure document, franchise agreement and a copy of the Code at least 14 days before the agreement is entered into.

The disclosure regime also extends to matters such as materially relevant facts, litigation, insolvency, changes affecting intellectual property and certain financial information.

Australia also provides a statutory cooling-off mechanism. Under the current Code, a franchisee can generally terminate a new franchise agreement within 14 days of entering into it, subject to the detailed statutory conditions and any permitted opt-out.

Termination and restraint-of-trade provisions have also received greater attention under the newer framework. The Code contains rules dealing with early termination, compensation and restraints following termination.

For franchisors, Australia demonstrates that compliance does not end when the FDD is delivered. The continuing relationship itself is regulated.

The UK: Contract freedom, competition law and commercial fairness

The UK takes a markedly different approach. There is no general UK franchise statute requiring franchisors to issue a prescribed franchise disclosure document or register franchise agreements. Instead, the relationship is generally governed by the franchise agreement together with broader areas of law, including contract, competition, intellectual property and consumer protection where applicable.

This gives franchisors and franchisees considerable contractual flexibility. It also places greater emphasis on careful drafting and negotiation.

English law does not generally impose a franchise-specific cooling-off period for business-to-business franchise agreements. A franchisee cannot assume that it will have a statutory right to change its mind simply because the transaction is a franchise.

Competition law can nevertheless be important. Territorial restrictions, resale-price provisions, exclusivity arrangements and post-termination restraints must be assessed carefully, particularly where they may restrict competition.

The UK approach also reflects broader principles of contractual transparency and fairness. The Competition and Markets Authority emphasises that unfair consumer terms cannot be enforced and that contractual provisions should be transparent and fair.

For international franchisors, the lesson is straightforward: the absence of a franchise statute does not mean the absence of regulation.

The EU: Competition Law Shapes the Franchise Agreement

The European Union presents a more complex picture because franchising is affected both by EU-level competition rules and by the national laws of individual Member States.

There is no single EU franchise code equivalent to the Australian Franchising Code. Instead, franchise arrangements may be examined under Article 101 of the Treaty on the Functioning of the European Union where they contain vertical restrictions capable of affecting competition.

The Vertical Block Exemption Regulation, Regulation (EU) 2022/720, provides a safe harbour for qualifying vertical agreements where specified conditions are satisfied. A central threshold is that both supplier and buyer generally have market shares of no more than 30%, while certain serious restrictions are excluded from the exemption.

This has particular relevance to franchise agreements because franchisors frequently impose territorial restrictions, exclusivity, purchasing obligations, online-sales restrictions and non-compete provisions.

Non-compete obligations that are indefinite or exceed five years, for example, are excluded from the block exemption. Post-termination non-compete obligations also require careful analysis.

Individual EU Member States may additionally impose their own disclosure, commercial agency or franchise-related requirements.

The European approach therefore requires franchisors to consider two questions: whether the agreement is permissible under EU competition law and whether the particular Member State imposes additional obligations.

The UAE: A Contractual Model with an Important Commercial Agency Overlay

The UAE is an increasingly important franchise destination, particularly in retail, hospitality, food and beverage, education and healthcare.

Unlike the US or Australia, the UAE does not currently have a standalone federal franchise statute prescribing a franchise disclosure document, mandatory cooling-off period or general franchise registration system. Franchise relationships are instead governed through a combination of contractual and commercial legislation, intellectual property rules and, where applicable, commercial agency legislation.

The UAE Commercial Transactions Law provides that commercial relationships are generally governed by the parties' agreement unless the agreement conflicts with mandatory commercial provisions.

This makes the franchise agreement particularly important. Key provisions normally include territory, exclusivity, fees, royalties, intellectual property, operating standards, supply arrangements, audit rights, renewal, termination, post-termination obligations and dispute resolution.

However, the legal analysis can change substantially if the relationship qualifies for registration as a commercial agency. The UAE's commercial agency framework can bring additional statutory consequences relating to matters such as exclusivity, termination and compensation.

Consequently, an international franchisor entering the UAE should determine at the outset whether its proposed structure is simply a franchise arrangement or could fall within the commercial agency regime.

The UAE model illustrates the importance of legal classification. The same commercial relationship may carry very different consequences depending on how it is structured and registered.

India: Contract-led Franchising Without a Dedicated Franchise Code

India does not currently have a comprehensive central franchise statute or a dedicated franchise regulator. The legal framework is instead spread across contract, competition, intellectual property, consumer protection, tax, foreign investment and sector-specific legislation. The Economic Advisory Council to the Prime Minister has itself highlighted the absence of a comprehensive franchise law and the information imbalance that can arise between franchisors and franchisees.

The Indian Contract Act, 1872, is particularly important. Section 27 provides that agreements restraining a person from exercising a lawful profession, trade or business are generally void, subject to limited exceptions. That provision can become significant when drafting post-termination non-compete clauses.

India also does not generally impose a US-style mandatory franchise disclosure document or universal pre-contractual waiting period. As a result, the quality of the franchise agreement and the due diligence undertaken by the franchisee assume considerable importance.

Franchisors expanding into India must also consider trademark protection, competition law, consumer protection, foreign exchange requirements and sector-specific regulations.

China: Registration, Disclosure and the 'Two Stores, One Year' Rule

China provides a striking contrast to India and the UAE. Its Commercial Franchise Administration Regulations establish a dedicated regulatory framework. A franchisor must have a mature business model and, generally, at least two directly operated stores that have been operating for more than one year — commonly described as the 'two stores, one year' requirement.

The franchisor must also file with the relevant commerce authorities within 15 days of entering its first franchise agreement.

China also imposes a substantial pre-contractual disclosure obligation. The franchisor must provide information to the prospective franchisee at least 30 days before entering into the franchise agreement, with the disclosure required to be truthful, accurate and complete.

This reflects a regulatory philosophy that seeks to prevent inexperienced or untested operators from selling franchise opportunities and to give franchisees meaningful information before they invest.

Restraint of Trade: A Global Fault Line

Post-termination restraints are among the most difficult provisions in international franchise agreements. A franchisor has legitimate reasons to protect confidential information, trade secrets, customer relationships and its business model. But an excessively broad restraint can prevent a franchisee from earning a livelihood after investing years and substantial capital in the business.

The legal position varies sharply. The EU's competition framework scrutinises non-compete provisions and limits the benefit of the block exemption for certain lengthy or post-termination restrictions.

India's Section 27 creates an even more significant challenge because restraints on lawful trade are generally void.

Australia has introduced specific rules concerning restraint-of-trade clauses in its franchising framework.

The practical lesson is that a global franchise agreement should not contain a single standard restraint clause applied automatically across every market.

Termination and Renewal: Where Disputes Often Begin

The end of the franchise relationship can be more contentious than its beginning. A franchisor needs the ability to terminate for non-payment, serious operational failures, brand damage, insolvency, fraud or repeated breaches. A franchisee, however, may have invested heavily in premises, equipment, staff and goodwill.

Questions therefore arise over notice periods, cure rights, termination for convenience, compensation, renewal criteria, transfer rights and the treatment of unsold stock and assets.

Australia imposes specific statutory rules concerning termination and renewal. In other jurisdictions, these issues are primarily determined by the agreement and general law.

In the UAE, for example, the consequences may be significantly different depending on whether the relationship remains an ordinary contractual franchise or falls within the commercial agency framework.

A well-drafted agreement should therefore distinguish between material and remediable breaches and establish a clear process for notice, cure and termination.

Dispute Resolution: Draft for the Dispute Before it Happens

Cross-border franchises inevitably raise jurisdictional questions. Should disputes be heard by the courts where the franchise operates? Should they be arbitrated in a neutral jurisdiction? Which country's law should govern the agreement?

Arbitration is often attractive for international franchise networks because it can provide confidentiality, procedural flexibility and, where properly structured, enforceability across borders. But arbitration clauses must be drafted carefully, particularly regarding the seat, governing law, institutional rules, language and interim relief.

Court litigation may nevertheless be preferable where mandatory local laws apply or where urgent injunctive relief is required.

The most important point is that dispute resolution should not be treated as boilerplate. The enforceability of termination rights, intellectual property provisions and post-termination restrictions may ultimately depend on the forum and governing law.

One Franchise Model Cannot Fit Every Jurisdiction

The global franchise landscape is moving towards greater transparency, but countries are reaching that objective through very different legal mechanisms.

The US emphasises disclosure. Australia combines disclosure with extensive relationship regulation and franchisee protections. The UK relies predominantly on contract and broader commercial law. The EU places substantial emphasis on competition rules. China combines disclosure with registration and minimum franchisor qualification requirements. India remains largely contract-driven, while the UAE relies on general commercial law with a potentially significant commercial agency overlay.

For franchisors, the implication is clear: international expansion requires jurisdiction-by-jurisdiction legal design.

Before launching a franchise in a new market, the franchisor should establish whether disclosure is mandatory, whether registration is required, whether a cooling-off period applies, whether franchisee-protection legislation restricts termination, whether non-compete clauses are enforceable and whether arbitration or court proceedings offer the most effective dispute mechanism.

For franchisees, the same comparison provides an equally important lesson. The existence of a famous international brand does not eliminate legal risk. A prospective franchisee should examine the franchisor's financial position, litigation history, intellectual property rights, territorial commitments, fees, renewal terms, termination provisions and post-termination restrictions before signing.

Franchise law is therefore no longer simply about protecting a brand or enforcing a contract. Increasingly, it is about managing the balance of power between two businesses whose interests are commercially linked but legally distinct.

As franchising continues to cross borders, that balance is likely to become the defining issue in the next generation of franchise regulation.

Dr. Sunil Ambalavellil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.