Earlier in the month, Alshaya Group announced a strategic partnership with international fashion retailer Primark to explore opportunities to bring Primark to the Middle East. This is a path well-trodden recently, as foreign brands (large and small) look to leverage off the burgeoning UAE economy.
We have advised numerous clients on such entries into the region, where Dubai is a preferred base for regional headquarters, please see the following link to a recently announced deal:
Habib Al Mulla with AlMarri in JV to introduce Sease Clothing to the Region
As multinational corporations expand into the vibrant UAE market, various franchise structures have proven effective. Among these, joint ventures stand out as a strategic option alongside traditional franchise models.
We describe below some of these structures and how they have been applied successfully in the UAE as well as in the broader MENA region:
Franchise Agreements
At the foundation of franchise operations lies the franchise agreement. This legal contract defines the relationship between the franchisor and the franchisee, detailing brand use, operational guidelines, royalty fees, and duration. The franchisor will invariably seek to ensure consistent service and product offerings across all franchise locations, helping to maintain brand integrity.
Joint Ventures
Many large companies consider joint ventures as a powerful structure for entering the UAE market. By partnering with local entities, international brands gain valuable insights into regional consumer behaviour, regulatory requirements, and cultural nuances. This collaborative approach allows both parties to share risks and resources. For instance, a foreign retail giant might collaborate with a well-established local company to navigate the complexities of the UAE business environment, facilitating smoother market entry.
Hybrids
A joint venture may be set up as a franchisee whereby the franchisor itself holds a shareholding in the joint venture company. This can be a “win/win” for both parties, as the franchisor has a vested interest in the joint venture and will profit from success, thus incentivising the franchisor and driving profit; and the local firm can accelerate the learning curve as to the new brand because it has closer contact with the franchisor.
We have also included arrangements in the joint venture agreements whereby “earn-ins” for one party can be included.
Support and Training Systems
Successful franchises often incorporate robust support and training systems. Franchisors provide initial and ongoing training in operations, marketing, and customer service, ensuring franchisees are well-equipped to adapt to market demands while maintaining brand standards.
Headquartering in the UAE
The UAE is a very popular location for regional headquarters. One particularly successful model is using a Dubai free zone entity as the joint venture company, allowing business units (marketing, finance, legal) to be in the free zone entity. This free zone entity can then establish wholly owned subsidiaries that can then be used for each territory in the region.
The franchise structures adopted by companies in the UAE, including traditional agreements and joint ventures, allow for a great deal of flexibility and are essential for navigating this dynamic market. By leveraging local partnerships, offering comprehensive support, and adapting to cultural nuances, these companies can enhance their chances of success in one of the world’s most lucrative business environments.
Seek Legal Counsel
Our expertise in corporate law and regulations allows us to provide effective and accurate advice to our clients, taking into consideration their unique circumstances and needs. Additionally, our experience and knowledge in handling corporate and commercial disputes enable us to represent clients in court proceedings.
Our corporate team has successfully advised and represented clients across various industries, including, but not limited to, oil & gas and energy, real estate, investment advisory and consumer goods, and we have advised a broad range of clients such as entrants to the UAE, Emirati families (including Royal families) and UAE-based enterprises. For further information, please contact Gerry Rogers, Corporate Partner, or any of the members of our team.
