The United Arab Emirates (UAE) is a business hub that has opened its doors to international business owners, which include local and international franchises. Today, there are several different types of franchises operating in the UAE.
Some popular franchises include mail and packaging services, dry cleaning, food delivery, restaurants, fast food joints, fashion and retail stores, automotive, and convenience stores. If you want to open a franchise in UAE, there are several legal and regulatory issues that you have to know.
Running a successful franchise takes determination, skill, and a thriving economy. The latter is what the UAE has to offer. If you are considering buying a franchise in the UAE or starting one, here are some things you need to know.
Opportunities To Open a UAE Franchise
There are several franchise opportunities that you can explore in the United Arab Emirates. The franchise industry earns over $30 billion, which is constantly growing. American franchisers or brands have the highest share of the industry in the Middle East to date.
American brands have over 70% share and are very dominant. Other leading brands are from China, Italy, the UK, Germany, and Japan. Several other franchisees and franchisors are still requesting new franchise brands.
There are over 100 different types of franchises you can choose from. These include both cheap and high-investment business opportunities. Your choice will depend on your interest, expertise, and capital.
1. Do Your Due Diligence
The franchise market in the UAE is quite vast. Therefore, it’s important to do your due diligence and conduct research to understand the market. Initially, the UAE only allowed its nationals or companies wholly owned by its citizens to have businesses, including franchises in the UAE.
However, to attract more international investors, the UAE allows foreign investors to own and run their businesses without needing an Emirati sponsor or partner. This means you can look at the most lucrative franchises and choose one that aligns best with your expertise and knowledge.
There are two types of franchise businesses in the UAE: single-unit franchises and multi-unit or developed franchises.
Single-unit franchises will allow you to sell the services or products of the franchisor through a single company. Whereas multi-unit franchises will allow you to open several other units and operate them under one company.
It is essential to know the type of UAE franchise business you want to open or buy. Once you find an industry you are interested in, you also need to seek some testimonials and reviews.
If possible, request the company for their Franchise Disclosure Document, and learn more about the company. This document is important because it contains critical information about the company and the franchising process. It should be made available to any interested franchisers.
2. Have a Business Plan
When buying or opening a franchise business, you need to have a business plan. The plan should contain a summary of the company, including business activities, competitor analysis, target market, and core competencies.
Additionally, it would be best to have a marketing plan, financial plan, and any funding alternatives you can look at. To protect your investment, you must be aware of all risks associated with your business and have a plan to handle the risk.
3. Get the Right Business and Trade License
It is possible to open a franchise or look up a Dubai franchise for sale and buy it both in the free zone and Mainland. Several factors will affect the type of business licence you get.
Conduction business in the Mainland is different from the free zones. Also, the type of business activity and the number of visas or shareholders will determine the kind of trade license you get.
Suppose you choose to start a business on the Mainland. You will need a local sponsor. On the other hand, you don’t need any local sponsor to operate a business in the free zone. Business owners in the free zone retain 100% ownership.
The licence application process will depend on whether you choose a mainland or free zone setup. You must also have a trade licence to open a franchise in Dubai or any other city in the UAE. To apply for the licence, you will need some documents, which include:
- The completed application form
- A copy of your passport and partner’s passports, if any
- Two colour passport size photos
The best way of getting the right licence is to work with an expert. This way, you will get advice on starting a business in the UAE, and they will also handle the licence application process on your behalf.
Get the right support services and secure the visas and licences you need to start your franchising business.
4. Apply for a Visa
Apart from the licence, you will need a licence to work or start a business in the UAE. One of the advantages of having a visa is the ability to sponsor your family or a domestic worker. According to Dubai visa laws, you can sponsor resident visas for a valid foreigner.
However, the size of your franchise business, its profits, setup, and proof of accommodation will determine the number of family members you can sponsor. To apply for the visa, you will have to take a mandatory medical exam.
The medical exam also applies to anyone you choose to sponsor. Learn more about how to sponsor your dependents and have your family with you in the UAE once you set up your franchise.
5. Prepare a Franchise Agreement
Apart from the licence, you must have a robust agreement with the franchising company. The franchise agreement is a vital legal contract between the franchisor and the franchisee. The document contains all the information, rules, and regulations between the two parties.
This agreement can contain information such as:
- The scope of the agreement, including duties and expectations
- Franchise fee
- Duration of the agreement
- Quality assurance and training
- Site selection
- Dispute resolution
- Limitation of liability
- Percentage of profit share
- Intellectual property rights
It is best to involve a lawyer when drafting the franchise agreement. Before both parties agree and sign the agreement, they have to disclose it before a Dubai court or the court of the Emirates to affirm you are starting the franchise in the United Arab Emirates.
Note that the franchise agreement is a binding document, and all parties must adhere to it. Therefore, ensure all the vital information about business information is clearly stipulated in the agreement.
6. Opening a Corporate Bank Account
You must have a corporate bank account to do any business in the UAE. Knowing the various financial institutions available in the UAE is a wise idea before choosing one. This will help you select a bank that is best suited for your business. Similarly, opening a UAE franchise business is no different.
The UAE is known for its banking industry and boasts some of the most professionally suited corporate banking services in the world. These banks uphold a high level of integrity and privacy. These are some of the most important traits a business person can look for in a bank.
When opening a business bank account in the UAE, you will need:
- A business plan
- Your CV
- Your company’s corporate documents
- A utility as proof of residency or address
- Corporate bank statement, if the company has been in existence
- Your personal and partners’ bank statements for the past six months
Your business plan should include all the information about your business, especially the activities you want to engage in. This can be a financial plan, potential clients, partners, suppliers, a brief business development plan, and a management team’s background.
The banks require your corporate documents because they indicate proof of business ownership. This is vital, especially for existing companies. The corporate document can also be the Certificate of Incumbency or any latest document from the authority.
You will need to include a comprehensive CV to show your business experience and professionalism. Since the accounting opening process can be pretty involving, it may be best to start early enough to avoid delays.
Consult your business consultant and know all the documents you need to open an account. Your consultant can help you through the process and ensure you submit every document correctly and promptly.
Why You Should Open a Franchise in UAE
The UAE offers both local and foreign investors the freedom of self-employment. The region has a flourishing economy that attracts several international businesses. Furthermore, the government has allowed investors to exploit the rich Emirates cities and encourages franchisors and franchisees to invest in the region.
There are several reasons why you should open a franchise in UAE.
1. Shared Advertising, Marketing, and Business Launch Campaign Costs
One of the primary reasons is that you will not have to worry about designing a logo, how much you should charge, writing sales literature, or whether customers will buy what you are selling.
Chances are your franchise will already have its market set apart, and you will only be bringing the brand closer to the customers. This makes planning for the business and assessing risks a little easier.
With a familiar brand, your advertising and marketing budget will be reduced. You will save more money and can choose to reinvest it in the business.
2. Thriving Economy
The Emirates has a powerful economy and this is due to the rich natural resources such as natural gas and petroleum, which they export to several countries. Also, UAE has a very high per-capita GDP and one of the most significant average monthly salaries.
The tourism industry also contributes greatly to the thriving economy of the UAE. Since such a flourishing economy is ideal for investment, you can be sure to achieve business success.
3. Ready Target Market
The UAE is mostly urban. Over 80% of people in the Emirates live in the cities. Some of the most populated cities are Dubai, Abu Dhabi, Sharjah Al Ain, and Ajman. Whatsmore, if you establish yourself in any of the Dubai free zones, you’re networking opportunities will open up.
Suppose you choose to establish your business in Dubai. Setting up your franchise business here could be a very remunerative decision because it will boost your market exposure to around 2.9 million people.
Also, since Dubai is one of the most popular shopping destinations in the world, your business will be exposed to several potential customers. Once you open your UAE franchise business, you must have a good marketing strategy to take advantage of such a large audience.
4. Zero Taxes
Franchise opportunities in Dubai are facilitated by Free Trade Zones giving. Apart from retaining 100% ownership, these zones attract absolutely no taxes. You will save even more money if you choose to set up your business in the United Arab Emirates Free Trade Zones.
Here are several other benefits of starting a franchise in the region:
- Freedom of employment
- Industry know-how
- Proven brand, trademark, and recognition
- Proven product or service outcomes
- Access to proprietary products or services
- Ready suppliers and bulk buying advantages
- On-going research and development
- Less risk of business closure or failure
- Semi-monopoly due to geographical boundaries or defined territory
Though you will still have to deal with competitors, your brand and business location can set you apart. Remember, if the franchise is from a renowned brand, you will have to meet your customers’ expectations.
This is because the customers already know what to expect, and the brand has a reputation to uphold. Therefore, to keep the doors of your business open, learn the company values of the franchisor, including their culture and quality.
Choose the Right Franchise to Open in the UAE
If you want to open the best franchise in UAE, you need to do thorough research and choose the right franchise to invest in. Regardless of the franchise you choose, it may be best to work with an expert business consultant.
We at Virtuzone will help you set up your business and ensure you get everything right. We have years of experience setting up business in the UAE and know the laws and what it takes to successfully set up a business in the Emirates.
Contact us today to learn more about franchising in United Arab Emirates and speak to our experts.