The structural question
Registration is the line that matters.
The UAE regulates commercial agencies federally, and a relationship registered as a commercial agency with the Ministry of Economy has historically given the registered agent exceptional protection: exclusivity in the territory, a claim to commission on sales into it even when made by others, and an ability to resist termination or non-renewal that has left foreign principals locked into relationships they wanted to end.
A franchise arrangement does not automatically become a commercial agency — it turns on how the relationship is structured, documented and registered. That is why UAE market entry is a structuring exercise before it is a commercial negotiation, and why the advice in published guidance is consistent: take the structure to counsel before the term sheet, not after it.
- Registered agency: territorial exclusivity, commission claims, entrenched position
- Unregistered arrangement: governed by contract, far easier to exit
- Whether a franchise falls in is a question of structure, not of the label used
- The risk sits with the brand owner more than with the operator
What changed
Federal Decree-Law 3 of 2022 loosened the grip.
The commercial agencies regime was replaced by Federal Decree-Law No. 3 of 2022, which reworked several of the features that made the old law so one-sided. Published summaries point to fixed-term agencies being able to expire without the automatic renewal that previously applied, a defined dispute route, and — subject to conditions — the possibility of agencies being held by entities that would not previously have qualified.
It did not abolish the protection, and transitional arrangements mean older agencies were not all affected the same way. The practical reading for anyone entering now is that the regime is more navigable than it was and still not something to walk into unadvised.
Where the company sits
A free-zone licence does not let you open on the high street.
Every UAE business trades under a licence, and the licence comes from either an emirate's economic department — the mainland — or one of more than forty free zones. The distinction decides where you may actually trade. A free-zone company operates inside its zone and is the usual vehicle for holding, regional headquarters or distribution; a retail outlet on a mainland high street or in a mainland mall is normally a mainland licence.
Foreign ownership of mainland companies was substantially liberalised from 2021, removing the blanket local-shareholder requirement across most commercial activities, though activity lists and emirate-level practice still vary. The structure question and the licensing question are therefore the same question, and both precede signing anything.
