5 Business Synergy The word synergy refers to the idea that the sum of the

5 business synergy the word synergy refers to the

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5. Business Synergy: The word “synergy” refers to the idea that the sum of the whole is greater than the separate parts. This principle can be applied to franchising. Those who buy a franchise become part of a “family” where all members work together for the good of the whole. Often, some of the most effective ideas come from franchisees who in turn share their ideas with the corporate office and with other franchisees. Due diligence should be conducted in the same manner when purchasing a franchise, as when opening any new business. The KSA's legal framework: The legal framework in the KSA is based on Shari'a (or Islamic) principles, which is the primary (but uncodified) source of law. In addition, the law in the KSA also consists of legislation passed by Government. The Kingdom of Saudi Arabia (KSA) continues to present attractive propositions for international franchisors seeking to expand their business operations. Navigating the KSA's complex regulatory framework however is not without its challenges. Understanding these challenges and the framework as it currently applies to franchise agreements in the KSA is vital for those either considering entering into the KSA for the first time, or those seeking to review their current business operations. Whilst there is no specific "franchise law" as such currently in force in the KSA, we are aware that the Ministry of Commerce & Investment (MOCI) released a draft Franchise Law for public consultation in January 2017. In line with the KSA's Vision 2030 strategy, the broad aims of that draft Franchise Law include the encouragement of franchise activities and foreign investment in the KSA by the enactment of a specific legal framework that regulates the franchisor / franchisee relationship and enshrines the basic rights of the parties. The deadline for those interested in providing feedback on the Franchise Law closed on 25 January 2017, and we will provide a further update on this once there is an announcement from MOCI. For the moment, as has been the case since 1992, franchise agreements are still subject to the requirements set out in the Commercial Agencies Laws and Regulations (CAL) (which was initially enacted in 1962, but has been subject to subsequent amendments).
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Under this law, there are a number of features which are important for franchisors to be aware of. These include: Similar to agency/distribution agreements, franchise agreements are required to be registered by the franchisee with MOCI and must meet the requirements of the law. This requires the completion of a bespoke application form by the franchisee which is to be submitted to MOCI, with relevant supporting documents. The provision of a model franchise contract by MOCI which can be used by the contracting parties. This is an optional contract that contains additional protections for the local franchisee. The parties however may choose to use their own form of contract, provided that this is compliant with local law.
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  • Fall '17
  • jane smith
  • franchisee, KSA

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