The Effectiveness of Franchise Regulation in Saudi Arabia: Challenges, Compliance, and Future Reforms

Abstract

The franchising sector in Saudi Arabia has experienced rapid growth in recent years, becoming an important contributor to economic diversification and private sector
development in line with Saudi Vision 2030. In response to this expansion, Saudi Arabia enacted the Franchise Law in 2019 to establish a clearer legal framework
governing the relationship between franchisors and franchisees. The law was introduced with the aim of enhancing fairness, improving transparency, protecting
contractual rights, and creating a more organized and reliable franchising environment. This study examines the effectiveness of the Saudi Franchise Law in achieving
these objectives, with particular focus on the legal obligations imposed on franchisors and franchisees, disclosure and registration requirements, and the mechanisms
available for dispute resolution and compliance monitoring. The study further analyzes the practical application of the law and evaluates whether the current legal
framework provides sufficient protection for both parties involved in franchise agreements. In addition, it offers a comparative overview of selected international
franchising regulations to highlight the strengths of the Saudi approach as well as areas where further development may be necessary. The analysis indicates that the
law has contributed positively to improving transparency and contractual accountability through mandatory disclosure obligations and registration procedures.
However, the study also finds that the effectiveness of the legislation is limited by certain challenges, including the absence of detailed enforcement mechanisms,
unclear procedural provisions, and limited penalties for non-compliance. These shortcomings may reduce the law’s practical efficiency and create uncertainty in the
implementation process. Overall, the Saudi Franchise Law represents a significant step toward regulating and modernizing the franchising sector in the Kingdom.
Nevertheless, further legal and administrative reforms are needed to strengthen enforcement, clarify compliance standards, and increase awareness among investors
and market participants. Enhancing these aspects would contribute to greater legal certainty, stronger protection for franchise stakeholders, and more sustainable growth
of the franchising industry in Saudi Arabia.