Explanation of the Saudi Franchise System for Dr. Mohammed Al-Atoudi

Explanation of the Saudi Commercial Franchise System in light of Islamic Jurisprudence Dr. Muhammad bin Othman Al-Atoud First Edition: 1446 AH – 2025 AD Number of pages: 702 About the book Considering the novelty of the system's issuance and its need for in-depth study and detailed explanation of its provisions and comparison with Islamic jurisprudence; due to the lack of comparative scientific studies on this subject between the Saudi system and Islamic jurisprudence; and the urgent need to study it through a comparative approach from both jurisprudential and systematic perspectives, I have chosen to address this topic through study and explanation, hoping that this book will contribute to understanding the provisions contained in the system from both the systematic and jurisprudential viewpoints. I hope this book will be a valuable addition that helps clarify the rulings related to commercial franchise activity for interested parties, and highlights the importance of the issuance of this system and its contribution to regulating franchise activity; as it is one of the most important commercial means to benefit from the expertise of major and international companies, as well as successful national company experiences. It helps expand the business of these companies at both local and international levels, and also contributes to creating successful investment opportunities for entrepreneurs and owners of small and medium enterprises, characterized by repeating successful models and benefiting from the fame of trademarks, which will reduce the risks of investment experiments, enable starting from where others left off, and create new job opportunities. The book Is distinguished and comprehensive in its subject matter, providing an accurate and simplified analysis of the commercial franchise system. The author has succeeded in presenting a clear and comprehensive idea about the rights and obligations of the parties involved in the franchise contract, as well as highlighting the legal aspects that determine the effectiveness of this system in the business environment. The book features depth and realistic analysis, making it a valuable reference for anyone wishing to understand how to manage and develop franchise businesses from both legal and practical perspectives. Additionally, the smooth and systematic style of the author makes this book an ideal tool for lawyers. Table of Contents Dedication 5 Introduction 9 Preface 11 Establishment of the Commercial Franchise and its Definition 13 Chapter One: Scope of Application of the Franchise System, Conditions for Granting, Restrictions, Disclosure, and Obligations of the Parties 28 Section One: Scope of Application of the Franchise System Provisions 30 First Topic: The Geographical Scope of Applying the Franchise System 31 First Requirement – Geographical Scope of Applying the Franchise System: 31 Second Requirement – Islamic Jurisprudence's Stance on the Geographical Scope: 34 Second Topic: The Qualitative Scope of Applying the Franchise System Provisions 38 First Requirement – Characteristics of the Franchise Contract: 38 First Branch – Characteristics of the Franchise Contract in the System: 38 Second Branch – Islamic Jurisprudence's Position: 44 Second Requirement – Agreements and Arrangements Exempted from the Franchise System: 50 First Branch – Franchises granted or issued by Royal Decrees: 50 Second Branch – Agreements or contracts subject to the Commercial Agencies System in the Kingdom: 51 Third Branch – Other agreements or contracts specified by the Saudi system: 54 Fourth Branch – Arrangements whereby the franchise owner is fully owned by the grantor: 59 Fifth Branch – Exempted agreements and arrangements specified in the system's executive regulations: 61 Sixth Branch – Islamic jurisprudence's stance on exemptions: 65 Section Two: Conditions for Granting the Franchise, Registration, and Disclosure 69 First Topic: Conditions for Granting the Franchise 70 First Requirement – Conditions related to the franchisor: 70 First Branch – The franchisor must have practiced franchise activities for the specified period legally: 70 Second Branch – Depositing the disclosure document related to franchise activities with the competent authority within the legal period: 73 Third Branch – Providing the franchisee with a copy of the disclosure document within the legal period: 74 Fourth Branch – Annual deposit of any changes in previously submitted information or documents: 75 Second Requirement – Conditions related to the franchisee: 76 First Branch – Possession of necessary licenses to practice the activities: 76 Second Branch – Having practiced franchise activities for the legal period before granting a sub-franchise: 77 Third Requirement – Conditions related to the franchise location: 77 First Branch – The nature of the location in the franchise contract: 78 Second Branch – Conditions of the location in the franchise contract: 101 First Sub-branch – The location must be feasible: 102 Second Sub-branch – The location must be specified or capable of being specified: 106 Third Sub-branch – The location must be legitimate: 107 Third Requirement – Islamic jurisprudence's stance on the conditions for granting the franchise: 109 Second Topic: Conditions for Registration and Disclosure 121 First Requirement – Definition of registration and disclosure linguistically, system-wise, and in Islamic jurisprudence: 121 First Branch – Definition of registration and disclosure linguistically and system-wise: 121 First Sub-branch – Definition of registration in language: 121 Second Sub-branch – Definition of registration in the system: 122 Third Sub-branch – Definition of disclosure in language: 122 Fourth Sub-branch – Definition of disclosure in the system: 122 Second Branch – Islamic jurisprudence's stance on the definitions of registration and disclosure in the system: 124 Second Requirement – Provisions of registration and disclosure in the system and Islamic jurisprudence: 126 First Branch – Provisions of registration in the system and Islamic jurisprudence: 126 First Sub-branch – Provisions of registration in the system: 126 Second Sub-branch – Islamic jurisprudence's stance on registration provisions: 127 Second Branch – Provisions of disclosure in the system and Islamic jurisprudence: 128 First Sub-branch – Provisions of disclosure in the system: 128 Second Sub-branch – Islamic jurisprudence's stance on disclosure provisions in the system: 136 Third Chapter: Obligations of the Parties to the Franchise Contract 141 First Topic: Obligations of the Franchisor 142 First Requirement – Franchisor's obligations in the system: 142 First Branch – Defining the rights granted to the franchisee: 143 Second Branch – Defining the franchise business model: 145 Third Branch – Training the franchisee's employees: 148 Fourth Branch – Providing expertise: 151 Fifth Branch – Supplying the franchisee with goods or services related to the franchise: 153 Sixth Branch – Maintaining the confidentiality of information and financial data: 159 Seventh Branch – Providing details of the financial compensation: 161 Eighth Branch – Commitment to the exclusivity condition: 169 Second Requirement – Islamic jurisprudence's stance on the obligations of the franchisor: 173 Second Topic: Obligations of the Franchisee 197 First Requirement – Franchisee's obligations in the system: 197 First Branch – Obtaining approval from the franchisor before changing goods, services, or methods of operation: 198 Second Branch – Providing data related to franchise activities to the franchisor: 201 Third Branch – Allowing the franchisor to inspect the facilities used in franchise activities: 206 Fourth Branch – Securing the franchisor's approval when changing the location of franchise operations: 212 Fifth Branch – Paying the financial compensation for the franchise: 214 Sixth Branch – Keeping secrets and not disclosing them: 217 Second Requirement – Islamic jurisprudence's stance on the obligations of the franchisee: 220 Third Topic: Shared obligations of both parties to the franchise agreement 222 First Requirement – Good faith in fulfilling their obligations in the system: 222 Second Requirement – Good faith in fulfilling their obligations in Islamic jurisprudence: 235 Third Requirement – Comparison between the Saudi system and Islamic jurisprudence regarding good faith: 248 Second Part: The Franchise Agreement First Chapter: Concept of the Franchise Agreement and its Elements 252 First Topic: Concept of the Franchise Agreement 253 First Requirement – Concept of the franchise agreement in the system: 253 Second Requirement – Concept of the franchise agreement in Islamic jurisprudence: 255 Third Requirement – Comparison between the system and jurisprudence in the concept of the franchise agreement: 260 Second Topic: Elements of the Franchise Agreement 262 First Requirement – Writing the franchise agreement: 262 First Sub-branch – Language of writing the franchise agreement in the system: 262 Second Sub-branch – Islamic jurisprudence's stance on the language of the franchise agreement: 267 Second Requirement – Clauses to be included in the franchise agreement: 277 First Sub-branch – Clauses to be included in the franchise agreement in the system: 277 Second Sub-branch – Islamic jurisprudence's stance on clauses to be included in the franchise agreement: 296 Third Topic: Advertising and Marketing Provisions 298 First Requirement – Advertising and marketing provisions in the system: 298 Second Requirement – Islamic jurisprudence's stance on advertising and marketing provisions: 301 Second Chapter: Waiver of the Franchise Agreement 305 First Topic: Waiver of the Franchise Agreement in the system 306 First Requirement – Requiring the franchisor's approval: 309 Second Requirement – Cases where the franchisor may refuse approval for the waiver: 316 First Sub-branch – The waivere does not have sufficient financial resources: 317 Second Sub-branch – The waivere cannot meet the reasonable requirements of the franchisor: 324 Third Sub-branch – The waivere does not meet the standards set by the franchisor: 325 Fourth Sub-branch – The waivere's written consent to assume the obligations of the franchise owner: 329 Fifth Sub-branch – The franchisee has not paid any due amounts to the franchisor: 330 Sixth Sub-branch – Initiation of bankruptcy procedures against the person controlling the franchisee: 332 Seventh Sub-branch – The waivere does not possess the necessary licenses or permits to operate the franchise, or is prohibited from practicing any commercial activity by judicial ruling or legal text: 333 Eighth Sub-branch – The original franchisee's breach of essential obligations and failure to address the breach: 335 Second Topic: Islamic jurisprudence's stance on the provisions for waiving the franchise agreement: 336 Third Chapter: Renewal and Extension of the Franchise Agreement and the Effects of Non-Renewal and Non-Extension 340 First Topic: Renewal or extension of the franchise agreement 341 First Requirement – Renewal or extension in the system: 341 Second Requirement – Islamic jurisprudence's stance on provisions for renewing or extending the franchise agreement: 354 Second Topic: Effects of not renewing or extending the franchise agreement 361 First Requirement – Effects of not renewing or extending in the system: 361 Second Requirement – Islamic jurisprudence's stance on the effects of not renewing or extending: 366 Fourth Chapter: Termination of the Franchise Agreement and its Effects 371 First Topic: Reasons for terminating the franchise agreement 372 First Requirement – Reasons for termination in the system: 372 First Branch – Expiry of the agreement period: 372 Second Branch – Mutual agreement to terminate: 374 Third Branch – Termination by the franchisor: 376 Fourth Branch – Termination by the franchisee: 392 Fifth Branch – Termination due to system enforcement: 394 Sixth Branch – Termination due to reasons beyond the parties' control: 401 Second Requirement – Islamic jurisprudence's stance on reasons for termination: 403 Second Topic: Causes of the contract's expiration 426 First Requirement – Concept of contract expiration in the system: 426 Second Requirement – Concept of contract expiration in Islamic jurisprudence: 427 Third Requirement – Comparison between the system and jurisprudence regarding contract expiration: 428 Second Cause – Causes of contract expiration: 428 First Branch – Causes in the rights of natural persons: 429 Second Branch – Causes in the rights of legal persons: 434 Third Requirement – Islamic jurisprudence's stance on causes of contract expiration: 445 Third Topic: Effects of terminating and expiring the franchise agreement 452 First Requirement – Effects in the system: 453 First Branch – Compensation: 453 Second Branch – Termination of the use of the trademark related to franchise activities: 455 Third Branch – Maintaining confidentiality: 456 Fourth Branch – Abstaining from exploiting contract elements: 458 Fifth Branch – Non-competition: 459 Sixth Branch – Entitlement to overdue amounts: 463 Seventh Branch – Disposal of inventory, marketing materials, equipment, and other assets: 464 Second Requirement – Islamic jurisprudence's stance on effects of termination and expiration: 468 Third Part: Disputes, Violations, and Penalties in the Franchise System First Chapter: Claims for Compensation 477 First Topic: Jurisdiction for compensation claims 478 First Requirement – Jurisdiction in compensation claims in the system: 478 Second Requirement – Islamic jurisprudence's stance on judicial specialization: 492 Third Requirement – Comparison between the system and jurisprudence on judicial specialization: 500 Second Topic: Violations of the franchise system and dispute resolution methods 521 First Sub-Topic: Violations of the franchise system and Islamic jurisprudence's stance 522 First Requirement – Violations of the franchise system: 522 Second Requirement – Islamic jurisprudence's stance on violations: 531 Second Sub-Topic: The authority to adjudicate violations and Islamic jurisprudence's stance 536 First Requirement – Authority to adjudicate violations: 536 Second Requirement – Islamic jurisprudence's stance on the adjudicating authority: 541 Third Sub-Topic: Methods of dispute resolution in franchise matters 547 First Requirement – Primary means of dispute resolution: 548 First Sub-branch – Primary dispute resolution methods in the system: 548 Second Sub-branch – Islamic jurisprudence's stance on primary dispute resolution methods: 551 Second Requirement – Alternative dispute resolution methods: 556 First Sub-branch – Alternative methods in the system: 556 Second Sub-branch – Islamic jurisprudence's stance on alternative methods: 567 Third Chapter: Penalties for Violations of the Franchise System 575 First Topic: Penalties for violations of the franchise system 576 First Requirement – Penalty of fine in the system and Islamic jurisprudence: 577 First Sub-branch – Definition of fine in language, system, and Islamic jurisprudence: 577 First Sub-branch – Definition of fine in language and system: 577 Second Sub-branch – Definition of fine in Islamic jurisprudence: 578 Third Sub-branch – Comparison between the system and Islamic jurisprudence in defining the fine: 581 Second Requirement – Fine penalty in the system: 581 Third Requirement – Fine penalty in Islamic jurisprudence: 582 Fourth Sub-branch – Comparison between the system and Islamic jurisprudence regarding the fine penalty: 594 First Requirement – Defamation penalty in the system and Islamic jurisprudence: 595 First Sub-branch – Definition of defamation in language, system, and Islamic jurisprudence: 595 First Sub-branch – Definition of defamation in language and Saudi system: 595 Second Sub-branch – Definition of defamation in Islamic jurisprudence: 596 Third Sub-branch – Comparison between the system and Islamic jurisprudence in defining defamation: 597 Second Requirement – Defamation penalty in the system: 597 Third Requirement – Defamation penalty in Islamic jurisprudence: 598 Fourth Sub-branch – Comparison between the system and Islamic jurisprudence regarding defamation penalties: 601 First Requirement – Penalty for waiving rights specified in the system and Islamic jurisprudence: 602 First Sub-branch – Penalty for waiving rights in the system: 602 Second Sub-branch – Islamic jurisprudence's stance on the penalty for waiving rights: 607 Fourth Requirement – Combining penalties and damages for harm in the system and jurisprudence: 612 First Sub-branch – No conflict between systematic penalties and the injured party’s right to claim damages in the system: 612 Second Sub-branch – Islamic jurisprudence's stance on the non-conflict between penalties and damages: 614 Second Topic: Penalties for violations of the franchise agreement 620 First Requirement – Concept of violation in language, system, and Islamic jurisprudence: 620 First Sub-branch – Concept of violation in language and system: 620 Second Sub-branch – Concept of violation in Islamic jurisprudence: 621 Third Sub-branch – Comparison between the system and Islamic jurisprudence in the concept of violation: 622 Second Requirement – Compensation for violations of the franchise agreement: 622 First Sub-branch – Cases requiring compensation: 622 Second Sub-branch – Islamic jurisprudence's stance on provisions for compensation for violations: 632 Third Sub-branch – Comparison between the system and Islamic jurisprudence in the penalty of compensation: 637 Conclusion 640 References and Bibliography 646 Subject Index 689