United Arab Emirates is a major business hub, embracing local and international franchises across various sectors. Those who do not wish to come up with an original business idea can establish their outlet of an existing business in the UAE as a franchise. In accordance with a study, 85% of franchisees remain in business for five years or longer, contrary to only 50% of startups lasting this amount of time. Discover our comprehensive guide on how to set up a franchise business in Dubai and navigate the process with ease.
What is a Franchise Business in Dubai?
Due to the increased business opportunities in Dubai, franchising is expanding in this region. A franchise business is a type of business where the owner of an already established parent company, also called the “franchisor,” sells a person, the “franchisee,” an opportunity to operate a business under the franchisor’s brand at a specific satellite location.
Launched brand recognition, the existing franchised business model, and continuous support provided by a franchisor are valuable in helping the franchisee succeed in an increasing business environment in the United Arab Emirates. Furthermore, the strategic position, superior infrastructure, fewer corporate taxation policies, and a friendly atmosphere are best for franchises to thrive.
Different Types of Franchise Businesses in Dubai
Before starting a franchise in Dubai, it is critical to know the structure of a franchise business. Here are the two kinds of franchise businesses that can be launched in Dubai:
- Single Unit Franchises
Single-unit franchising is the kind of franchising in which a franchisee makes a contract with the franchisor to start and function only on a franchise outlet in a distinct region.
- Multi-Unit/ Developed Franchises
Multi-unit franchising is the kind of franchising in which a franchisee makes a contract with the franchisor to start and function more than one franchise in a distinct region within a certain range of time.
Steps to Set Up a Franchise Business in Dubai
Initiating a franchise in Dubai showcases an exciting chance, considering Dubai’s thriving economy and its status as a commercial hub. Here is a step-by-step approach to how to set up a franchise business in Dubai:
Research the Market
To successfully initiate a franchise in the UAE, start with an in-depth market dynamics study. Understand factors like customer requirements, existing competition, and market gaps. Resources such as Dubai industry reports, local startup news, and market analysis from prestigious sources will be beneficial.
Historically, Dubai allowed only its nationals or companies fully owned by its residents to launch businesses, consisting of franchises. However, new legal reforms now permit international investors to have their businesses without the need for an Emirati or local sponsor. This critical alteration creates a gateway for the market to a worldwide array of franchise opportunities.
Choose the Right Franchise
When selecting a franchise, ponder on the two main types present in Dubai: single-unit and multi-unit (or developed) franchises. A single-unit franchise authorizes you to function in one outlet or office in the name of the franchisor’s brand. Alternatively, a multi-unit franchise agreement permits you to start and manage many locations, growing your business mark under one company.
Deciding on the right type of franchise business in Dubai is critical. Initiate by understanding an industry that matches your interest. Consider multiple franchises based on their business model, incentives, brand repute, and assistance granted to franchisees. Attending franchise expos, confirming with existing franchisees, and recruiting a franchise consultant can also give foresight.
Evaluate Financial Requirements
Understand the financial needs of the franchise chance you’ve selected. This comprises the initial franchise cost, startup capital needs, current fees, and working capital. Make a fine financial plan to make sure you have all the critical funds to manage these operating costs and thrive your business till it gives you profit.
Collect testimonials and reviews from existing franchisees to understand their experiences. Choose a franchise that aligns your expertise and finances, making sure it grants success in Dubai’s market. Moreover, ask the company’s Franchise Disclosure Document and get an understanding of the company.
Develop a Business Plan
Creating a comprehensive business idea is significant when launching or getting a franchise in the UAE. Your business idea should consist of:
- Executive Summary
- Business Description
- Market Analysis
- Marketing Strategy
- Operational Plan
- Financial Plan
- Risk Management
Secure Financing
Determine the initial investment needed and understand financing options. Many franchises need initial costs, location, supplies, and initial funds. UAE banks grant many business financing opportunities and you can also check private financing options and strategic joint investment.
Choose Your Business Location
Choosing whether to start your franchise in a UAE Free Zone or on the Mainland is an important choice that affects your business functions, regulatory needs, and growth.
Free Zones permit you to own the franchise completely, do not need a local sponsor, and grant tax exemptions, consisting of no personal income tax.
On the contrary, the Mainland permits you to trade anywhere in Dubai without limitations, granting a bigger market outreach.
Register Your Business and Apply for a Trade License
Registering your business and getting a trade license is an important step in starting your franchise in the UAE. This process makes sure that your business is recognized by the law and in compliance with local regulations. Here’s how to start the registration and licensing process:
Choose a Business Name: Select a legally permitted and meaningful business name that complies with Dubai’s regulations. Avoid using names that are already in use, include offensive language, or indicate association with the government.
Decide on the Business Structure: Select the most suitable legal form for your franchise, whether an LLC, sole proprietorship, or another structure.
Apply for a Trade Licence: Submit your application for a trade license to the Department of Economic Development(DED) for Mainland setup or to the relevant Free Zone authority for Free Zone setup. Add all the important documents, mainly your passport copy, visa copy (if applicable), NOC from your sponsor (for locals), and your franchisor’s corporate documents. Pay the needed fees once your application is accepted.
Additional Approvals: Based on the nature of your franchise, you may need additional acceptance from other governmental authorities (e.g., the Ministry of Health if you are starting a food franchise).
Apply for a Visa
Requiring the appropriate visa is crucial for you and any international staff you want to recruit for your franchise in Dubai. As a franchise owner, you are usually permitted an Investor Visa. It grants you residency privilege, allowing you to reside in the UAE and manage your business function. Investor visas are mainly accepted for 3 years and can be renewed.
For your staff, you would require sponsoring Employment Visas. These visas are linked to the job and the employer, meaning that the employee would work for the sponsoring entity. For visa applications in a Free Zone, you will primarily process your visa through the Free Zone’s immigration service. On the Mainland, applications go through the General Directorate of Residency and Foreigners Affairs (GDRFA).
Prepare a Franchise Agreement
You must have an agreement with the franchising company. The franchise agreement is a crucial legal contract between the franchisor and the franchisee. The document comprises all the information, regulations, and rules among both parties.
This agreement includes information such as:
- The scope of the agreement, comprising of duties and expectations
- Franchise fee
- Duration of the agreement
- Quality assurance and training
- Site selection
- Dispute resolution
- Limitation of liability
- Percentage of profit share
- Advertising
- Intellectual property rights
It is important to include a lawyer when making the franchise agreement. Before both parties accept and sign the agreement, they must show it before a Dubai court or the court of the Emirates to ensure that you are initiating the franchise in the UAE business hub.
Open a Corporate Bank Account
You should have a corporate bank account to do any business in Dubai. It allows for safe transactions, effective financial administration, and compliance with local rules. This account also helps to build reputation and trust with partners and clients.
Build Your Infrastructure
Make your Facilities and operational setup to the franchisor’s standards. This encompasses setting up your premises, acquiring essential equipment, and instituting standard operational protocols. Hiring qualified staff and ensuring they get proper training per the franchisor’s guidelines is also critical.
Market and Launch
Make a marketing strategy to start your franchise. Use both traditional and digital marketing funnels to reach your defined audience. Work with the franchisor for any grand opening assistance, as many franchises grant marketing materials and plans to assist new franchisees.
Partnering with expert business setup consultants like Xpert Advisory streamlines the process, helping you establish a successful franchise business in Dubai’s thriving market.
Cost of Opening a Franchise in UAE
The revenue of starting a franchise in the UAE can vary critically based on multiple factors, for example, the kind of business, business location, and the specific emirate in which you are setting up. Here’s a general breakdown of the costs:
- Business License Costs: The cost for a trade license on the mainland mainly starts from AED 15,000* to AED 50,000* per year. It can change based on the nature of the business, and the size of your franchise featured under the license. Moreover, the fees of a trade license in free zones can be low, starting from AED 10,000* to AED 50,000*.
- ·Business Registration Costs: Costs for approval and business registration can be from AED 1,000* to AED 10,000* or more.
- Visa Cost: Visa fees can be different, with every visa mainly costing between AED 2,000* to AED 5,000* or even more, containing medical tests and Emirates ID processing.
In general, starting a franchise in Dubai could see startup costs varying widely from around AED 20,000* to over AED 100,000*, omitting ongoing functional costs. It’s highly recommended to confirm with a business setup consultant like Xpert Advisory who can grant comprehensive foresight and current information relevant to your business kind and particular site within the UAE.
Benefits of Opening a Franchise Company in Dubai
The UAE grants both local and international investors the freedom of self-employment. The location has a thriving economy that attracts many foreign businesses. Moreover, the government has permitted investors to capitalize on the rich Emirates cities and forces franchisors and franchisees to invest in the right location. There are multiple reasons why you should start a franchise in UAE, including:
1. Shared Advertising, Marketing, and Business Launch Campaign Costs
One of the main reasons for starting a franchise in the UAE is the significant savings on branding and marketing costs. Since franchises come with established brand reputations, business strategies, and marketing plans, startup costs for designing logos or sales literature are omitted. However, franchisees mainly contribute to a marketing cost for wider advertising initiatives, which assists local industry penetration and needs investment.
2. Thriving Economy
The UAE is a robust and diverse economic landscape powered by its resource abundance like natural gas and petroleum, that are supported by non-oil units such as hospitality, commercial trade, financial sector, and real estate development. This economic variation makes Dubai an environment for investment and grants a productive location for a thriving business. Also, the UAE has a very high GDP and one of the highest average monthly salaries.
3. Ready Target Market
Over 80% of the UAE’s population resides in urban areas with Dubai alone housing around 2.9 million people. These cities’ global and internationally diverse population contributes to a diverse customer base for new businesses. Launching a franchise in any of Dubai’s Free Industry-focused zones delivers benefits to targeted sectors, Strengthening networking channels and broadening market presence. Also, since Dubai is one of the Prime shopping cities across the globe, your business will be accessible to numerous audiences prepared to spend.
4. Zero Taxes
Franchise opportunities in Dubai’s Free Trade Zones offer substantial financial benefits, including tax exemptions, like zero corporate or personal income taxes, which enhances profitability. However, it is essential to note that a Value Added Tax (VAT) at a 5% tax is levied on most products or services in the UAE, affecting overall pricing strategies.
5. Industry Know-how and Proven Brand Recognition
Franchising grants access to allow entrepreneurs to leverage business practices along with brand credibility, substantially easing the process of market entry. Franchisees leverage a proven and evolved business model, ensuring they adopt already successful strategies.
6. Less Risk of Business Closure or Failure
Due to established business models and ongoing assistance from the franchisor, franchises often report higher success rates than independent entrepreneurial ventures. This constant support reduces the risk factors usually associated with new business ventures, providing franchisees with a safety net of expert guidance.
7. Semi-monopoly
Many franchise models provide territorial exclusivity, reducing intra-brand competition within certain designated territories. The semi-monopoly structure empowers franchisees to benefit from an established brand and customer base without the direct threat from fellow franchisees under the same brand. Though you will still face competition from others, your brand identity and prime location can create a unique edge within the market.
Conclusion
Starting a franchise business in the UAE is a strategic move that offers immense growth potential in a thriving market. With its strategic location, budget-friendly policies, tax advantages, and robust infrastructure, Dubai offers a wealth of opportunities for franchise businesses to flourish. By understanding the legal requirements and securing the necessary licenses, you can launch your franchise in one of the world’s most dynamic markets.
FAQs
1. What is franchise business in the UAE?
A franchise business in the UAE involves an agreement where a franchisor grants the rights to an individual or entity to operate their brand. Franchises offer a proven business model, established brand recognition, and support in areas like operations and marketing, making them a popular choice for entrepreneurs.
2. What is the cost of opening a franchise in the UAE?
The setup costs for opening a franchise in the UAE vary depending on the brand, location, and operational scale. Usually, costs include franchise fees, license, marketing, initial equipment, and premises investment. One can estimate exact expenses by consulting professionals.
3. How to open a franchise business in Dubai?
To open a franchise business in Dubai, identify a suitable brand, sign a franchise agreement, and obtain the required trade licenses specific to your business type. UAE offers investor-friendly policies and a strategic business environment, making it an ideal place for franchise setups.
What are the benefits of a franchise business setup?
The UAE offers numerous benefits for franchise setups, including access to a thriving market, tax advantages, and a supportive business environment. Franchises provide a ready-made business model, reducing risks and enabling faster market entry.
