Your expansive guide to franchising’s legal frameworks, and what a business should look for when it comes to comprehensive counsel
Interview by Kieran McLoone, deputy editor for Global Franchise.
The legalities of franchising might not be the most outwardly thrilling subject associated with this dynamic and global business model, but it’s a specialism that is intrinsic to international success.
Protecting your brand from a whole litany of legal troubles can only be done with an experienced, knowledgeable team. Foregoing proper system and processes will open a brand up to issues which could damage not only the brand’s reputation, but could also jeopardize an entire franchise network.
To cover everything you need to know and highlight some key trends within the industry, we’ve spoken to several experts from a plethora of legal firms and have prepared a crash course for brands with global ambitions.
This week Melissa Murray of Bird & Bird LLP speaks about franchising in Saudi Arabia and the Middle East.
KM: What are the changes taking place in Saudi Arabia that will directly affect franchisors entering the region?
MM: The new Saudi Arabian franchise law is due to commence in April 2020. Under this law, both the disclosure document and the franchise agreement need to be in Arabic and registered with the Ministry of Commerce and Investment.
Given that most international franchise agreements are in excess of 50 pages in order to comprehensively cover all of the items necessary for a sophisticated brand, converting such a document into Arabic is going to be a hard task. Arabic and English do not directly translate – it is a transliteration – and therefore the process of translation into Arabic needs to be undertaken very carefully.
Most translation companies do not have legally qualified staff who can do a thorough, correct translation, so important legal concepts can be lost. We have seen examples of translations missing important schedules, listing incorrect details in areas such as the development schedule, and most importantly incorrectly stating clauses such as governing law and dispute resolution provisions which are critical to get right.
The process of translating documents into Arabic is also usually very costly. It is however not recommended to simply have the franchisee convert the document into Arabic – it is important to have your lawyers check the translation to ensure the legal concepts are correctly represented as in the event of a dispute, the registered Arabic version can take precedence over the English document (regardless of any clause in the franchise agreement to the contrary).
KM: What fundamentals have international franchisors overlooked in the Middle East?
MM: I have seen franchisors who are new to the Middle East not realize the importance of trademark registrations and/or the length of time it can take to register a trademark in some jurisdictions. We have had a number of instances where franchisors do not realize that in the Middle East, it can take up to 12 months for a trademark to register which often causes difficulties when negotiating with a franchisee, or when the franchisee is looking to open their outlets.
