Commerce ministry tightens compliance, warns of six franchise violations

The Ministry of Commerce in Riyadh has underscored the critical need for adherence to the Commercial Franchise Law and its implementing regulations while granting or managing a franchise. The authority has issued warnings regarding six significant violations that a franchisor or franchisee might commit during franchise operations.

These transgressions encompass failing to register the franchise agreement and disclosure document with the ministry within 90 days of the agreement's signing; not providing the disclosure document to the franchisee at least 14 days before the agreement's conclusion or the payment date, whichever occurs sooner; neglecting to register any amendment to the franchise agreement, whether due to changes in parties or duration, with the ministry within 90 days of its execution.

Additionally, violations arise when a party fails to request the cancellation of the franchise agreement's registration within 90 days following its expiry, termination, or upon issuance of a court ruling invalidating or terminating the agreement. Moreover, granting or offering a franchise before the completion of a one-year operational period by two individuals or entities is prohibited.

Selling to at least two distinct franchisees, offering or granting a sub-franchise, and conducting a franchise business in the Kingdom for a minimum of one year are also deemed violations. The ministry has clarified that it receives reports electronically of the aforementioned violations, as stipulated in the regulations and their implementing rules, through its website.