The Story Behind the Franchise Between Two Brothers in KSA

Franchising doesn’t always happen between large corporations. Sometimes, it starts with a conversation over coffee between two family members. This is the case for many small businesses in Saudi Arabia, including one we’ll focus on in this post: a franchise agreement between two brothers.

What began as a simple understanding between siblings turned into a real business. But even family-based ventures need structure. In this post, I’ll walk you through how we approached drafting a franchise agreement between two brothers in Saudi Arabia, what legal safeguards were included, and why even informal franchises need formal documentation.

Why Structure a Family Franchise?

It’s common for families in the Kingdom to support each other in business. In this case, one brother owned a small but successful retail business. The other wanted to use the same trade name and branding to open a branch in another city.

They trusted each other, but I reminded them: trust doesn’t replace contracts. Clear terms prevent misunderstandings, especially when things get successful (or complicated).

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Step 1: Clarifying Intent – Is This Really a Franchise?

The first step was to determine the nature of the relationship. Even though the agreement was between two brothers, the setup looked like a franchise:

• Shared trade name and branding
• Operational know-how provided by the original owner
• Use of the same suppliers and pricing structure

Even if no franchise fee was paid, the legal characteristics of a franchise agreement in Saudi Arabia were present. That meant disclosure requirements, IP protection, and clear role definitions.

Step 2: Choosing a Simple Legal Structure

Since the franchisee was a family member, they didn’t want to go through complex franchise registration processes. Instead, we:

• Used a private contract that clearly laid out the terms
• Avoided a traditional franchise registration with the Ministry
• Included an internal agreement on usage rights of the brand

This is common in family-based franchises in KSA, but it doesn’t mean skipping legal protection.

Step 3: Key Clauses in the Agreement

Here are the most important sections we included:

1. Use of Trade Name

• Permission to use the trade name in a specific city only
• No sub-franchising allowed

2. Support and Training

• Original brother would help train staff and share SOPs
• Weekly remote check-ins to ensure brand consistency

3. Revenue and Royalties

• No monthly royalty fee, but 10% of yearly net profit to be shared
• Financial reporting once every quarter

4. Duration and Renewal

• Agreement valid for 3 years
• Renewal subject to mutual review

5. Termination

• Either party can terminate with 60 days’ notice
• If the franchisee harms the brand, the agreement ends immediately

Step 4: IP Protection Within the Family

Protecting a franchise agreement in Saudi Arabia means protecting intellectual property (IP), even when family is involved. We added:

• A clause stating the brand, logo, and methods belong solely to the original owner
• Restrictions on copying or modifying brand materials without approval
• A non-compete clause for 2 years after ending the agreement

Step 5: Dispute Prevention and Resolution

To reduce the chance of future arguments, we:

• Held a joint meeting to explain the agreement to both brothers
• Added a mediation clause for disputes
• Chose local Saudi courts as the dispute resolution forum

It’s always better to address disagreements through dialogue before heading to court.

Step 6: Lessons for Other Families Considering Franchises

Family or not, a franchise agreement needs clarity. Here’s what we learned:

• Formalize the informal: Treat family agreements like any other business
• Think long-term: What happens if the business grows fast? What if one party wants to exit?
• Keep roles clear: One brother manages operations, the other owns the brand. No overlap.

This structure helped preserve the relationship while setting up a solid business.

Conclusion

Creating a franchise agreement in Saudi Arabia doesn’t always require a formal franchise chain or large investment. Sometimes, it starts between two brothers who share a dream.

By structuring their agreement with basic protections—use of brand, profit-sharing, and dispute resolution—we turned their informal understanding into a professional arrangement. It helped them preserve both their business and their bond.

If you’re considering a similar arrangement, take time to write it down clearly. A good contract is not a sign of mistrust—it’s a sign of mutual respect.