Franchising is a form of growth technique that enterprises that have the incremental potential and a mode of establishing a new entity to minimize possible risks use.[1] Notably, numerous syndicates use the franchise approach to develop and expand their enterprises, strengthen their identity, and increase market presence. Notably, the concept of scarcity of materials can be applied to illustrate the model that the franchising approach can develop quickly.[2] Franchising is a process by which the franchisor gives the right of sale merchandise or services to the franchisee in a defined region within a speculated period. Kuwait uses different legislation to regulate franchising.
Franchising Laws in Kuwait
Majority of the Middle East countries, including Kuwait, do not have special laws designed to govern the franchising enterprise. However, the system is regulated by analog integration of the existing rules; specifically the commercial agency laws since most of these nations view franchise as an agency. In essence, the franchisee might decide to be registered as an agent to the franchisor who is then identified as the primary party to an agreement.[3] Therefore, both the players are controlled by the elements of the registered business agency.
Commercial Agency Law and Executive Regulations
The principal formation in the franchising sector is the provision of the executive regulations to the commercial agencies laws passed in the year 2016. These legislations extrapolate the necessities and duties designed for entrepreneurial agencies, distributorships, and contracts. Furthermore, the regulations require compulsory registration of arrangements by the parties involved in a franchise enterprise. Some of the requirements entailed in the commercial agencies law include the identification of the agent and the nationality of the principal.[4] The agency law also describes the types of commodities and services entailed in the contract and the rights and duties of the players. Consequently, the law integrates the area that the dealer is given the rights to operate.
The commercial agencies law speculates that an unregistered business agency is illegal therefore the trading entity cannot register claims. Moreover, modifications to the entrepreneurial arrangements are channeled to the ministry of commerce and registration and corrected within three months.[5] Only the commercial agent that is liable for a fine in case of misconduct is considered for registrations. As such, the commercial agencies law plays a significant role in the establishment of franchise business in the country. Consequently, joint entities are usually limited in the country with the Kuwaiti citizens owning above 51% of the share and more than 60% for enterprises, such as banks and insurance industries.[6] Non-citizens are restricted from owning companies or franchised, including the oil and gas syndicates.
Intellectual Property Law
The Intellectual Property (IP) rights are established to offer a balance of static and dynamic efficacy thereby enabling innovators to alleviate rivalry by having a substantial share of the value of their ideas.[7] Therefore, the current statutory in Kuwait enables the authors to gain from the financial aspects of their innovations that other companies use. Additionally, the regulation allows the innovators to have control and connection with their workings hence limits the possibility of the franchise using the ideas of another person without authorization. Additionally, the intellectual act protects the franchisor’s intellectual commodity hence it limits the likelihood of enterprises producing similar products. The provision considerably illustrates that the elements of an agreement may be provisionally or permanently blocked if any of the parties involved in the contract infringe the law.[8] As such, it is mandatory for the individuals engaging in a franchise contract to comply with the statutory when dealing with the copyrighted materials in the country.
Non-disclosure deals and solid arrangements that entail non-complete articles must be signed to prevent a breach of the law. Various agents register the IP as their entity thus acquires the rights for the trademark after the termination of the agreement. However, the primary encounter is that of a grey market in which costs of products in Kuwait are higher by 10-40% than those of other Gulf countries council (GCC) nations.[9] Therefore, some entrepreneurs import goods without proper licenses, therefore, they cause the accredited commodities to be sold cheaply.
Property Ownership Laws
The law provides numerous constraints that prevent non-citizens from possessing property in Kuwait. For example, the law deters foreigners from owning land, and various companies are closed or restricted from non-GCC members[10]. However, the country does not have land taxation and exposing of property informative material is deterred as it is considered a private entity. Various techniques are involved when it comes to collaterals for which the creditors can have an alternative.[11] For instance, banks connect their credits to impending severance remunerations and cannot foreclose on domestic real estates and individual belongings.
Conclusion
In a business world that is rife with competition, it is imperative for organizations to exploit all the means at their disposal to give themselves a chance to survive and thrive. A lot of businesses around the world use franchising to develop themselves. In Kuwait, there are no specific laws that guide the process of franchising; hence, the system depends on the customary laws that regulate industries. The commercial law requires mandatory registration of the agreement between the parties before the execution of operations. Furthermore, the act agitates for the filing of agency name and the nationality of the principal party. The IP right enables the innovators to benefit from the financial aspects of their novelties that are used by other companies and prevent the production of counterfeit products. The IP provides for non-disclosure contracts and solid contracts that entail incomplete articles be signed to avert infringement of the law. Consequently, the property ownership prevents foreigners from possessing properties, such as land, in Kuwait, which minimizes the effectiveness of franchising model in the country.
Bibliography
Al Oula Law Firm. Overview of franchising internationally and domestically. 2014. Ebook. 1st ed. Kuwait.
Al-Saidi, Mejbel, and Bader Al-Shammari. “Ownership Concentration, Ownership Composition and the Performance of The Kuwaiti Listed Non-Financial Firms.” International Journal of Commerce and Management vol.25, no. 1 (2015): 108-132.
Bareša, Suzana, Zoran Ivanović, and Siniša Bogdan. “Franchise Business as a Generator of Development in Central Europe.” UTMS Journal of Economics 8, no. 3 (2017): 281.
Calderon-Monge, Esther, Ivan Pastor-Sanz, and Pilar Huerta-Zavala. “Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure.” Sustainability 9, no. 8 (2017): 1419.
Doronin, Dmitry. “Macro-level Market Research of Kuwait.” (2013).
Kyle, Margaret, and Yi Qian. Intellectual property rights and access to innovation: evidence from TRIPS. No. w20799. National Bureau of Economic Research, 2014.
Walker, David, and Christopher Walugembe. “Franchising In Kuwait: Overview”. Uk.Practicallaw.Thomsonreuters.Org (2017). https://uk.practicallaw.thomsonreuters.org/8-631-5764?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1#co_anchor_a443865.
[1] Bareša, Suzana, Zoran Ivanović, and Siniša Bogdan. “Franchise Business as a Generator of Development in Central Europe.” UTMS Journal of Economics 8, no. 3 (2017): 281.
[2] Calderon-Monge, Esther, Ivan Pastor-Sanz, and Pilar Huerta-Zavala. “Economic Sustainability in Franchising: A Model to Predict Franchisor Success or Failure.” Sustainability 9, no. 8 (2017): 1419.
[3] Al Oula Law Firm. “Overview on franchising internationally and domestically.” (2014). Ebook. 1st ed. Kuwait.
[4] Walker, David, and Christopher Walugembe. “Franchising In Kuwait: Overview.” Uk.Practicallaw.Thomsonreuters.Org (2017). https://uk.practicallaw.thomsonreuters.org/8-631-5764?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1#co_anchor_a443865.
[5] Ibid
[6] Doronin, Dmitry. “Macro-level Market Research of Kuwait.” (2013).
[7] Kyle, Margaret, and Yi Qian. Intellectual property rights and access to innovation: evidence from TRIPS. No. w20799. National Bureau of Economic Research, 2014.
[8] Doronin, Dmitry. “Macro-level Market Research of Kuwait.” (2013).
[9] Doronin, Dmitry. “Macro-level Market Research of Kuwait.” (2013).
[10] Ibid
[11] Al-Saidi, Mejbel, and Bader Al-Shammari. “Ownership concentration, ownership composition and the performance of the Kuwaiti listed non-financial firms.” International Journal of Commerce and Management 25, no. 1 (2015): 108-132.