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Franchising in Egypt: Navigating the Legal Terrain for International Brands

Egypt, distinguished by its unique blend of historical depth and modern evolution, has progressively emerged as an attractive landscape for franchise.
14.11.23 | Source: andersen

The onset of globalization, combined with rapid advancements in digital ecosystems, has made the world more interconnected than ever. Such interconnectivity has paved the way for businesses to explore efficient strategies for expansion and brand penetration. One significant avenue that has garnered immense attention from international brands is franchising. Egypt, distinguished by its unique blend of historical depth and modern evolution, has progressively emerged as an attractive landscape for such franchising endeavors. This article aims to illuminate the intricate legal maze that surrounds franchising in Egypt, highlighting the opportunities and essential considerations for international brands.

Legal Landscape of Franchising in Egypt:

Egypt, being proactive in adapting to global business trends, has laid down specific legal structures for franchising. The essence is to ensure that both the franchisor and the franchisee operate within a well-defined and secure legal boundary.

Absence of Direct Subsidiaries:

A standout point in Egyptian law is the absence of provisions allowing foreign companies to create direct subsidiaries. Instead, the legal environment in Egypt mandates foreign entities to establish local companies, which effectively act as their local subsidiary or franchise. This arrangement, while unique, provides a robust structure ensuring the interests of both the franchisor and franchisee are safeguarded. Andersen Egypt, with its vast experience in this domain, has been at the forefront in assisting global brands navigate this particular facet.

Laws Governing Franchising:

While there isn’t a singular law dedicated exclusively to franchising, several overarching laws come into play:

  • Commercial Law No. 17 of 1999: This law delineates the nature of commercial agencies, which encompasses franchises, and clarifies their rights and obligations.

  • Law No. 131 of 1948: This is Egypt’s principal codification of the law of obligations and contracts, among other civil matters. It regulates general contract principles, which franchising agreements will fall under, defining the nature of obligations, consequences of breaches, and terms of contractual arrangements.

  • Law No. 72 of 2017: This is the primary legislation that covers foreign investments in Egypt. It provides a range of incentives and guarantees for foreign investors, including tax incentives, guarantees against expropriation, and the right to remit profits abroad. It also stipulates the sectors where foreign investments are particularly encouraged.

Setting Up the Local Entity:

To establish a franchise in Egypt, international brands typically need to set up a local entity. This entity acts as the intermediary or ‘franchisee’ that holds the license to operate under the brand’s banner. Andersen Egypt specializes in assisting brands with this intricate process, ensuring all legal compliances are meticulously adhered to.

Intellectual Property Rights:

Given that franchising heavily revolves around brand identity and proprietary processes, the protection of intellectual property is paramount. Egypt’s robust intellectual property regime, governed by Law No. 82 of 2002, offers comprehensive protection to trademarks, copyrights, and patents, ensuring franchisors can securely expand their brand without the apprehension of IP infringements.

Dispute Resolution:

Like any business venture, franchising isn’t immune to disputes. However, Egypt has a well-defined judicial system that offers mechanisms for dispute resolutions, both through litigation and arbitration. The choice of jurisdiction and governing law, usually embedded in the franchise agreement, plays a pivotal role here.