Do you want to know how you can start a franchise business in Dubai?
Starting a business with the backing of a successful and strong brand is the perfect way to financial freedom. The benefits of a franchise include brand recognition, operational support, and a proven track record. However, you should still take your time to conduct proper research in all the aspects of launching such a business. To help, we’ll walk you through the process of opening a franchise.
Start by Conducting Research
You need to start by conducting due diligence on the franchise brand. While it’s easy to request a marketing prospectus from franchisors, it’s better to read testimonials from previous and existing franchisees.
If you are dealing with a well-established international brand, you can request a Franchise Disclosure Document (FDD). This document outlines franchising rules, fees, franchise responsibilities, and key financial information. Alternatively, you can request a draft copy of the “Franchise Agreement”. The franchise agreement is the legal contract that contains all the franchisor’s rules and regulations.
Types of Franchise Business in Dubai
The Dubai Department of Economic Development (DED) categorizes franchises into two distinct categories:
- Single-unit franchise: the franchisee will sell products or provide services of the franchisors through a single company;
- Multi-unit franchise: the franchisee will open several sites which will be controlled by a single company.
It may seem self-explanatory why one would follow one model over the other. It’s still best to speak to a seasoned consultant over which model you should follow.
Do You Need a Local Partner?
By opening a business in a free zone, you will retain 100% ownership regardless of the type of business that you open. In areas not covered by the free zone, you may require the assistance of a local partner or service agent depending on the nature of the business.
As a service business, you can retain 100% ownership but will be required to have a local service agent (LSA). An LSA is a UAE national who assists a foreigner in the licensing requirements in exchange for an annual fee. We can help you obtain an LSA.
If you sell or distribute products, you will need to set up a company in which a UAE national has 51% of the share of the business. However, if you are entering the UAE market for the first time, this can be a daunting task as you may not know any UAE nationals personally. This is where a consultant can act as an introducer.
In Dubai, a side agreement is created to state that the economic benefit in shares of the company, which is legally held by the UAE shareholder, belongs to the foreign national. This means that the economic interest of the UAE national in the company is limited to an agreed annual fee.
One of the key reasons why people turn to start a franchise business is the support that comes from a well-developed brand. Some brands have dedicated real estate contractors, banking contacts, extensive operations, human resource and marketing teams that will make your company launch significantly easier.
Local businesses are more willing to engage with internationally recognized brands. This, in turn, makes it easier to initiate a working relationship even if your business is the first foray of the franchise in Dubai.
Although franchising isn’t for everyone, it can be great means to success for anyone who wants to own a business. Speak to us when you are ready to take the leap.