PRODUCT MARKET STUDY:

FRANCHISING
1.0 Introduction
Franchising is the most effective way to expand a successful business in the new millennium. A survey revealed that Dubai is going to become the most densely shopped city on the planet. Dubai is going to become the showcase for world leading brands and franchise outlets will help regional market players to gain a foothold in one of the richest regions in the world. With a proper business strategy, everybody can carve out their niche in this highly competitive but lucrative market. The advantage of Dubai is its strategic location - midway between the Far East and Europe. It is the epicentre of a vast region extending from the Middle East to the Indian subcontinent, and Africa to the Commonwealth of Independent States, covering one and a half billion people with a combined GDP in excess of US$1.5 trillion. The figures are the reason behind the decision of several market leaders in consumer and other products to set up a base in Dubai. The pro-business policies of the government helped Dubai to become the busiest trade hub in the region. Dubai imports goods worth more than US$14 billion annually and handles trade worth US$100 billion. The huge investments in infrastructure facilities will soon catapult the city-state to the forefront of world cities. International companies are recognising the potential of Dubai as a tax-free haven to launch their products to the most interesting emerging markets for the future. The region has a combined population of over one billion and a large proportion of this total will enter the international consumer market for the first time in the 21st century. The backbone of Dubai's economic boom is its thriving construction sector and sprawling shopping malls. The fall out of Dubai's success is triggering new business ventures in nearby cities like Abu Dhabi, Sharjah and Ajman. Industry experts value investments in shopping malls and related infrastructure in the emirate to exceed Dh25 billion (USD 6.81 bn) by 2006. Dubai is now dotted with 40 world-class shopping malls and the construction of 10 new projects like Dubai Mall with over five million square feet of retail space are nearing completion. The competition in the UAE's retail sector is intensifying with ever growing stakes as new shopping malls are announced at frequent intervals. All these malls are vying for potential customers with several offers and the government is backing them with year-round events like Dubai Shopping Festival,
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Dubai Summer Surprises and City That Cares'. Dubai's tourism officials aim to be attracting 15 million tourists every year by 2010. The strategy for success is exclusivity. Sources close to a new mall nearing completion revealed that they are planning to introduce 80 new brands from Europe to the Middle Eastern market. They are expecting the fresh brands will provide a new image to the mall. If the new entrants emulate this strategy, it will open a floodgate for European brands in Dubai. The existing trends show that Dubai is on the fast track to reaching that stage. Besides Dubai Mall, several new massive retail space projects are nearing completion in Dubai. Major among them are Nakheel's Garden Mall and Al Futtaim Group's Dh3 billion (USD 817.44 mn) Mall of Emirates, to be the biggest mall in the world on the Shaikh Zayed Road.

2.0 Middle East Franchising Market

UAE The Gateway of Middle East North Africa (MENA) Region The franchise industry, currently estimated at more than US$ 14 billion across the region, is estimated to grow at 27 per cent annually. While fast food accounts for 40 per cent of the total market, other sectors are also growing rapidly. In addition to inter-Gulf trade, Dubai also reaches an outlying ring of huge markets including East African countries, the CIS, Iran and the Indian subcontinent. Therefore, by establishing a base in Dubai, international businessmen, manufacturers and exporters of less sophisticated equipment and mass consumer products can also successfully find readily available buyers for their goods. Burger King chain operates over 120 restaurants in the Middle Eastern region through its master franchisee Jana International Company Ltd. The company runs through local Arab franchisees who serve 100% Halal pure beef and chicken patties with fresh and locally sourced vegetables. Coffee brands flourish in Dubai. Costa Coffee brand signed a five year extension to its UAE master franchise agreement with Maritime & Mercantile International (MMI). Under the new agreement MMI is aiming to open a significant number of new outlets in high profile retail and commercial locations. "The premium coffee sector is enjoying strong growth, as the UAE - especially Dubai - continues to develop, attracting affluent tourists and business travellers who appreciate quality and recognise the familiar Costa coffee brand. Second Cup caf is also targeting expansion across UAE with the launch of its fifth location in Dubai recently. The brand entered the market in March 2003 through its master franchisee Bin Hendi Enterprises, and is set to enter further locations in Sharjah, Deira and Abu Dhabi, as well as pursuing further Middle Eastern expansion in countries including Oman, Saudi Arabia and Qatar.

This move is in line with the company's ambitious growth strategy to capture a larger market share of the rapidly increasing specialty coffee consumer segment. Trends indicate the Middle East region is shifting to a more qualitative cup of coffee. The brands and quality products are well received by the vibrant, cosmopolitan population. Franchising offers sources of new business opportunities and employment to locals and expats. Now home grown Franchisers, like Magrudy's & Caf Ceramic who are ready to take their brands across the world highlights the success of this exhibition & the Franchise industry in the Middle East. Malaysian Marrybrown Fried Chicken The rapidly growing Marrybrown Fried Chicken system is the first Malaysian fast food company to go international via the franchising system. The Malaysia-based company, founded in 1981, now has over 100 companyowned and franchised fast food restaurants in Malaysia, China, Singapore, Brunei, India and the United Arab Emirates (UAE). There are 95 company-owned and franchised outlets throughout the peninsula. Overseas, it has 16 franchises in China, seven in southern India, two in Brunei, three in the UAE and one in Singapore. The company's first Middle East outlet was set up in Dubai. The other outlets would be in other Middle Eastern countries, with the majority in Jeddah, Medina and Mecca in Saudi Arabia, as these are the largest markets. The Middle East region would see about 120 Marrybrown restaurants within the next five years, of which 20 outlets would be in the Gulf countries of Oman, Kuwait and Bahrain. Developing Market The Middle East is one of the fastest growing franchising destinations for marketers from across the world. The region is probably the most investor friendly region with full support from the Governments, attractive tax free facilities and world class infrastructure. Additionally, improved Intellectual property Legislations, a high number of High Networth Individuals and a young upwardly mobile consumer market keen on leisure and consumer spending make the Middle East an ideal place for Franchising opportunities. The regions need to grow fast and integrate with global industries could be the reason behind regional franchising industrys galloping growth. Franchising, working on the principle of reciprocity of business interests, removes the primary barriers to expansion. Firstly, it allows companies to expand without the risk of debt or the cost of equity.

Current projected high demand growth areas for franchising in the Middle East include restaurant and fast-food outlets, quick printing, laundry & dry cleaning, temporary office services, retail and convenience stores. This is in addition to other identifiable high growth sectors like automotive, apparel, education, beauty, IT, hotels, car rentals, retail goods, food products and much more. Heavyweights such as Toys R Us, McDonalds, Avis, Hertz, Kentucky Fried Chicken (KFC), Pizza Hut and Holiday Inn are already well entrenched franchise businesses in the region. The retail industry in the Middle East is trundling along at a frenetic pace and at AED 30 billion (USD 8.17 bn), is already the fourth largest contributor to the UAEs GDP. As a fall out of this phenomenal expansion, there is also increased and intense competition between new incoming and established brands, retailers, vendors and other service providers and this presents new opportunities and challenges for the business community. Market demography, government corporate laws and taxations, labour issues as well as the socio-cultural dynamics, the Middle East markets are diverse in nature. Middle East is an amalgam of diverse demographic & commercial factors. There are many different countries - each with its own customs, cultures, languages and laws - which makes expanding into this market more challenging. A thorough understanding, research and analysis of market and local conditions will be imperative for any new organizations entering the markets. Small & Medium Enterprises of western comfortable niche in Middle East North Enterprises (SME) owners will find many Working Approach and the personalized community here. Focus On Emerging Markets The primary reason of interest in this region is the affluence of Middle Eastern markets, the preference for quality goods, fairly consistent import standards and requirements. Middle East is one of the fastest growing and developing markets in the world economy today. The region is probably the most investor friendly region with full support from the Governments, attractive tax free facilities and world class infrastructure. Franchising essentially is a coming together of the western business entrepreneurs in the region who exhibit a high degree of professionalism, and the cooperation and dependability of Arab business professionals. Small & Medium Enterprises sector in region is set for massive growth as Government focuses on Entrepreneurship. countries will find an attractive and Africa region. The Small & Medium similarities within their own Hands-on approach preferred by the business

The viability and popularity of international products & services, brands and concepts are and will continue to attract substantial new opportunities for investment in the Region.

3.0 Growth Potential

Business and Industry Companies considering expanding into the Middle East must identify a well-known company that is economically appropriate and culturally respected to partner with. A peaceful Middle East will undoubtedly accelerate the liberalisation of the private sector and will dictate a total revamping of the areas financial networks and institutions. The resulting new economic tidal wave will encourage greater freedom of movement of goods and people throughout the Middle East and North Africa Region. UAE is witnessing a paradigm shift in its economic development indicators. Even as the traditional oil-based economy of UAE is positive and offers enormous investment potential, there is a conscious strategic effort to diversify into nontraditional development. The Government in the Region is investing heavily to prepare the area for a massive phase of growth and development. The Government has earmarked US$ 500 billion over the current decade for specific sectors such as Energy, Education, Healthcare, Telecommunications and Infrastructures. The creation of the Dubai Executive Council and Dubai Economic Council, Free trade zones, Dubais internet and media cities are indicators of a synergy between Government and Business to boost the economy. The existing facilities are further expanded by a textile, healthcare and festival city in addition to the creation of the Dubai International Financial Centre (DIFC), which represents Dubai as a regional banking and insurance hub. Property & Real Estate Sector Recently property & real estate market in the area is abuzz with activities as Dubai became the first state in the Gulf to allow non-GCC nationals to buy property. This will transform the real estate sector and opens up a massive and strong interest in the property projects. Retail Retail infrastructure has expanded rapidly, improving and modernizing retail offerings. On the regional basis including GCC countries, Retail International reported that it expects a total of 6.4 million sq. metes of modern retail space to be completed by 2005.

Franchise Potential The regional economy of the Gulf countries is entering a new stage with the small and medium enterprises and the franchise sector playing a crucial role in the economy. Franchising initiatives are offered attractive tax-free facilities and world class infrastructure of the region. Additionally, super efficient franchise venues are increasingly available that require less square footage, smaller inventories, fewer employees and shorter hours. Low interest rates, investment cash amassed on the sidelines, and a need for jobs make the climate for franchising even more favourable. Banks, too, have recognized the potential of franchising and are offering financial incentives tailored to this market. Forty per cent of the market is accounted from the multinational chains such as Burger King, McDonalds, Kentucky Fried Chicken and Pizza Hut, who are already well entrenched franchise businesses in the region. Home dcor and shoe retailers, business centres, and companies in the field of education, business consultancies are keen to gain a foothold. Franchise contributes to the growth and development of the economy and helps establish the Gulf countries as an international centre of business and trade by promoting entrepreneurial spirit. There is a tremendous response from investors in the region as franchising is an important source of new business opportunities. Franchising in the Middle East is on the threshold of remarkable growth. While fast food accounts for 40 per cent of the total market, other sectors are also growing rapidly. The UAE, especially Dubai is an ideal place for the franchise sector with an access to lucrative Middle East, sub-continent and African markets with their combined population of 1.4 billion people and a staggering combined GDP of $1.9 trillion, according to a study. Franchising sector is full of growth potential in the UAE and GCC countries due to ever increasing range of products and services catering to new audiences and it is the next big thing in the world of business. The franchising sector is growing rapidly to reach the Dh30 billion mark (USD 8.17 bn), representing the fourth largest contributor to the UAE's Gross Domestic Product. Franchising in the Middle East and Dubai includes retail and convenience stores, printing, restaurants and fast-food outlets, laundry and dry cleaning and temporary office services. Moreover, UAE is also rated as the best investment destination and business hub of the Middle East which will boost the franchising sector as it has the required

excellent infrastructure, free zone and ports, cosmopolitan lifestyle as well as policies and incentives that supports business. Prospects The UAE is very receptive to franchising. High per capita income, receptivity to new products, tax-free earnings and an upwardly mobile population are indicators of the future growth potential for this market. Currently, franchises are operating in fast foods; dine-in restaurants; auto leasing; apparel; soft drink bottling; beauty products; hotels; toys; photography; jewellery; vending machines; dry cleaning; furniture; hardware stores; office supplies; natural health products; publications; quick printing; garden care and florists; sporting goods; retail/ convenience stores; maid and personal services. Today, the largest segment in this industry is fast food with most major US fast food companies already established. There remains considerable potential for franchises of all kinds. The UAE is leading the regional franchise market expansion, which is growing at 27 per cent annually, along with, the youth population making up more than 40 per cent of consumers. It is estimated that the franchise market will continue to maintain a good growth rate. The massive growth of franchising is a direct result of the realisations worldwide. It is ready market for expansion as Investors and the Governments are looking for diverse sectors, not restricted to only a traditional oil dictated economy. The franchising industry worldwide has taken notice of the enormous potential of Middle East Region. Franchisers need to remember that Middle East, unlike other regions of the world is not a single destination. There are many different countries each with its own customs, cultures, languages and laws making expansion into this market more challenging. Franchisees need to identify a company that is well positioned and is a leading brand with worldwide proven track record, ambitious expansion plans, full fledged franchise support, strong and dedicated master franchisee and programmes tailored to franchisees market place. On their part, franchisees will have to integrate technology in their franchise offerings or risk losing the prospective investor to another more-with-it industry or brand. Franchisees should be able to attract the very best candidates, those that will execute the franchisers system and processes, helping build the brand. Franchiser produced and updated training manuals, customer relations policy and procedure plans must be available to stay abreast of customer needs and lifestyle changes. Consumers are no longer as homogeneous as they once were.

Substantial care and attention to the customer, backed by rich employee personal service, are compulsory. Currently, the number of home grown brands expanding through franchising in the region is minimum compared with Germany or Brazil where 90 percent of 830 and 680 franchised systems respectively originate within the country. Franchisees should not get swayed by the success of the brand in other parts of the world. They should first do a feasibility study in their own market. Stability and servicing the franchisees are also important issues for incoming franchisers. Franchising needs to provide an adequate return not just profitability. A business should generate a 20 per cent return on investment after deducting the owners salary and a royalty (typically between four per cent and eight per cent) if it is going to keep its franchisees happy. Franchise Development Development, Dubai Management Department of Economic

The Department of Economic Development, Dubai (DED) has launched the Franchise Development Management Service on 8th May 2005. The service is aimed at developing the new and existing franchise businesses in Dubai, including individuals and Small and Medium Enterprises (SMEs) to identify, buy and establish new franchises in the Emirate. One of the strategic objectives of DED is to establish conducive investment atmosphere so as to attract local and foreign investments in commercial and industrial projects. The DEDs franchise development management service has been set up with the objective of attracting international corporations to set up their regional base in Dubai and offering a franchise license to U.A.E. businesses, thus contributing to the progress of economic development. The DEDs franchise service is expected to offer a bouquet of services including setting up of a database of franchise opportunities, setting up of a franchise research centre and support desks, the provision of franchise management training.

4.0 Market Access

Rules & Regulation Customs regulations are relatively straight-forward and include the following legalized documentation: commercial invoice and certificate of origin.

General contract and commercial law apply to franchise agreements as no special legislation for franchise arrangements are currently in place. Franchise operation rights in the UAE are usually owned 100% by a single company or individual. In other cases, the franchisee enters into a joint venture with the franchisor to operate all outlets as "company owned" stores employing local managers Other Import Regulations UAE authorities require following rules to be rigidly adhered to for all imports. Failing which the goods are liable for rejection at the port of entry. Multilingual labels such as Arabic/ English are acceptable. In fact, the latter are recommended due to the large number of English speaking expatriates residing in the Gulf. Labels must contain the product and brand names, country of origin, manufacturer, net weight, production and expiry dates, ingredients and additives, if any. Metric units are mandatory. Imports of alcoholic beverages are permitted in UAE, but advertising alcoholic products is prohibited. All beef, lamb, mutton and poultry products must be Muslim slaughtered and supported with halal certificate (bearing name and signature of Muslim Slaughter man), on official stationery of competent Islamic Authorities. Invoice and Certificate of Origin, health and Halal Certificates should be legalized by relevant authority. Certificate of origin and invoice should be authenticated by Chamber of Commerce. In case more than one brand or item is shipped in a container, few cartons of each brand/ item should be stacked at the door of the container for inspection at the port. Market Characteristics and Consumer Preferences Pricing Competitive pricing is the most important feature of Dubai market, which made Dubai a major re-exports centre. Therefore, companies who wish to market products in Dubai should consider pricing very seriously. A thorough market study should be done before entering the Dubai market. Packaging Although regulations require food labels to be printed in Arabic, English-only labels are still accepted. Bilingual labels are permitted (e.g., Arabic/ English), provided one of the languages is Arabic. Bilingual labels or Arabic stickers must not contradict or cover information on the original label. No picture or recipe requiring pork or alcohol is allowed. Labels must contain:

Product and brand names Ingredients, in descending order. Additives, using their "E" number. Origin of all animal fats. Net content in metric units. Country of origin. Manufacturer's name and address. Special storage and preparation instructions, if needed. Shipping cartons must include product and brand name, number of units, unit weight per product, manufacturer's name and address, country of origin and production/ expiry dates matching the product. Shelf-life standards for food products are strictly enforced, with snacks in canisters allowed nine months and snacks in bags given six months. Production/ expiry dates must be engraved, embossed, printed or stamped in indelible ink on the original label or primary packaging.

Distribution Channel There are three principal methods of distribution: Directly by importers and producers to wholesalers and retailers. The large retail companies import directly and distribute to competing retailers. By van operators who purchase directly from producers or importers and distribute under commission, primarily to small convenience stores. By companies that buy in bulk from different local manufacturers, then mix and pack products under their own brand names. New-to-market suppliers are encouraged to work with an established importer capable of servicing major retail outlets and hotels. Markups of 15 percent over import price can be expected from wholesalers and of 20 percent over wholesale price from retailers.

5.0 Assessment and Prospects for Malaysian Franchisees

Franchise has proven to be a perfect way to create a successful business; giving people the chance to compete globally with an international standard for their products. In the last decade the franchise business in the Middle East & North Africa marked a rapid growth. The area is viewed as midway between Europe and East Asia, which makes it easy for the residents to communicate with the surrounding areas. The region's population growth rate is 3%-5% per year, which is one of the highest regional rates in the world.

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The following points may be considered before starting a franchise outlet in the UAE:

Study the market. Malaysian franchises are often ignorant of local market conditions. Visit the region and bring product samples. Often, personal contact can make a sale. Participate in a regional franchise show. Meet potential importers and gather first-hand feedback about your produce. Target the proper importer, distributor and retailer. Be prepared to fill small orders. Local importers tend to purchase small quantities, until they are sure of a product's market potential and the supplier's staying power. Provide promotional assistance such as point-of-sale materials, samples for tasting or introductory price discounts. Be willing to consider providing Arabic/English labels if a product is successful. Your competitors will.

6.0 Doing Business in Dubai

In the UAE, economic activity is regulated by individual emirates as well as the Federal Government. In Dubai, the authorities have deliberately sought to create an environment which is well ordered without being unduly restrictive. As a result, Dubai offers businessmen operating conditions that are among the most liberal and attractive in the region. There are many options open to international companies seeking to establish a business relationship with Dubai. Apart from forming a trading relationship, for many companies there are distinct advantages in being on-the-spot to research market prospects, make contacts, liaise with customers, and see through the details of any transactions and orders secured. Having a presence can provide considerable business advantages in the Middle East. Businessmen in the region prefer to deal with someone they know and trust and personal relationships are much more important in doing business in the Arab world than they are in Western Europe or America. Also, the buying patterns of some countries served by Dubai tend to be unpredictable, creating a need for first class market intelligence and information. Licensing The basic requirement for all business activity in Dubai is one of the following three categories of licenses: Commercial licenses covering all kinds of trading activity; Professional licenses covering professions, services, craftsmen and artisans; Industrial licenses for establishing industrial or manufacturing activity.

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These licenses are all issued by the Dubai Economic Department. However, licenses for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health. More detailed procedures apply to businesses engaged in oil or gas production and related industries. Practicing some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai. In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry. Ownership Requirements Fifty-one per cent participation by UAE nationals is the general requirement for all UAE established companies except: Where the law requires 100% local ownership; In the Jebel Ali Free Zone; In activities open to 100% GCC ownership; Where wholly owned GCC companies enter into partnership with UAE nationals; In respect of foreign companies registering branches or a representative office in Dubai; In professional or artisan companies where 100% foreign ownership is permitted. Legal Structures for Business In the past, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree. Since 1984, steps have been taken to introduce a codified companys law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law" - and its by-laws have been issued. In broad terms the provisions of the Law are as follows: The Federal Law stipulates a total local equity of commercial company and defines seven categories of can be established in the UAE. It sets out the shareholders, directors, minimum capital levels and further lays down provisions governing conversion, companies. not less than 51% in any business organization which requirements in terms of incorporation procedures. It merger and dissolution of

The seven categories of business organisation defined by the law are:

1. 2.

General partnership company Partnership-en-commendams

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3. 4. 5. 6. 7.

Joint venture company Public shareholding company Private shareholding company Limited liability company Share partnership company

Partnerships Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnership-en-commendam and share partnership companies. Joint Venture Companies A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who - unless the agreement is publicized - bears all liability. In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects. Public and Private Shareholding Companies The Law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office. Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. The chairman and a majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of limited liability companies. Limited Liability Companies A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Such companies are recognized as offering a suitable structure for organizations interested in developing a long term relationship in the local market. In Dubai, the minimum capital is currently Dh. 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.

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The following steps are required in establishing a limited liability company in Dubai. Select a commercial name for the company and have it approved by the Licensing Department of the Economic Department; Draw up the company's Memorandum of Association and have it notarized by a Notary Public in the Dubai Courts; Seek approval from the Economic Department and apply for entry in the Commercial Register; Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin. The license will then be issued by the Economic Department; the company should then be registered with the Dubai Chamber of Commerce and Industry. Branches and Representative Offices of Foreign Commercial Companies The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed. Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term "commercial agent"). Local agents - also sometimes referred to as sponsors - are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature. To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows: Apply for a license from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the license, the Ministry will: forward the application to the Economic Department to obtain the approval of the Dubai government; forward the application specifying the activity that the office or branch will be authorized to undertake in the UAE, to the Federal Foreign Companies Committee for approval; Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial license specifying the activity to be practiced by the foreign company; The branch or office should be entered in the Economic Department's Commercial Register, and the required license will be issued; The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce; Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry. Branches and Representative Offices of Foreign Professional Companies Branches and representative offices of foreign professional firms may be 100% foreign owned provided UAE nationals or 100% UAE owned companies are appointed as local agents. Such agents are not involved in the operations of the firm

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but assist in obtaining visas, labour cards etc and are paid a lump sum as remuneration. The Economic Department is the authority in charge of licensing such branches or representational offices. Professional Firms In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licenses, visas, labour cards, etc.

6.0 Trademark law in the UAE

Introduction In the course of developing the nation into a regional and international trading center, UAE authorities now consider the protection of intellectual property rights in the UAE as a prerequisite to the UAE's standing and competitive edge as the primary commercial center of the Middle East. The Federal Government of the UAE issued a trademark law which came into force on January 15, 1993, while implementing regulations were enforced on February 2, 1993. The trademark law and implementing regulations repealed the former trademark law issued in 1974, under which trademarks were registered in Ras Al Khaimah, the only one of the seven UAE emirates which had a formal trademark registration procedure. Registration in Ras Al Khaimah did not provide for the protection of trademarks in the remaining emirates. However, some protection was afforded in the other emirates if the registration in Ras Al Khaimah was accompanied by a series of local publications in the other emirates where protection was sought. Under the new federal law and the enforcement measures coordinated among various government departments, it has now become possible for trademark owners to protect their marks. Trademark owners may seek government assistance to ensure that goods bearing infringing marks are seized and in certain cases destroyed, and that the owners of the infringing marks are fined. Effective January 1, 1995, the UAE became a member of the GATT. It is currently a member of the World Trade Organization. The period of protection provided as a result of registration of a trademark is ten years. Registrations may be renewed for subsequent ten year periods. Procedure for registering a trademark in the UAE

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Registration of trademarks in the UAE is accomplished by means of an application to the Ministry of Economy and Commerce in the Emirate of Abu Dhabi. Trademark applications must be filed in Arabic, together with 14 specimen drawings of each mark. Other documents listed in Annex 1 of this catalogue must also be filed. Trademark applications may be filed by the trademark owner or by a local law firm licensed in the UAE. After examining a trademark application, the Ministry issues an examination report which states whether further information must be provided or whether there are any requirements, conditions or limitations in connection with the prospective registration. The Ministry normally calls upon the applicant to reply to such reports within a specific time period. Any requirements listed in the Ministry's report must either be accepted by the applicant or appealed to the Trademarks Committee of the Ministry. Fees of AED 250 (USD 68) are payable for each hearing before the Trademarks Committee. The Committee's decision is further appealable to the civil court. Upon resolution of all outstanding issues, trademark applications preliminary approved for registration are published in the UAE Official Gazette at a further cost of AED 500 (USD 136). The trademark must also be published in two leading Arabic newspapers, at a cost of approximately AED 800 per newspaper publication. After publication, the general public is provided 30 days within which to submit written objections to the Ministry concerning the registration of a mark. Any objections submitted are forwarded within 15 days of the opposition being filed to the applicant, who then has 30 days within which to respond. The Ministry then decides whether to accept or reject the application. This decision may be appealed to the Trademarks Committee of the Ministry, and then to the competent courts. If the mark is accepted, the Trademark Registrar notifies and provides details concerning the mark to the federal and local emirate, Chambers of Commerce and Industry. Trademark registration certificates are then issued upon the payment of AED 5,000 (USD 1362). In view of all the statutory time periods required for completing each procedural step, the entire registration process may generally be completed after approximately 12 to 18 months. However, backlogs in application filings can result in substantial time delays. What can be registered as a trademark The following can be the subject of a trademark registration 1. Language terms that have no meaning in relation to the goods or services with which they are associated; 2. Language terms which have by virtue of their use over time attained distinctiveness and distinguishably in connection with the goods or services with which they are associated;

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3. 4. 5.

Surnames; Geographic names; (e) Numbers; Slogans;

6. Logos; (h) Designs; (i) Musical or sound trademarks; (j) Newly coined words; and (k) Combinations of any of the above items. Restrictions to the registration of a trademark The following may not be the subject of a trademark registration or any element thereof: (a) A mark that is similar or identical to a trademark previously registered or, if proven, used with respect to the same class of products or services. For use to be sufficient, it must be on a substantial commercial scale over an adequate time period in the normal course of the business activities of the party claiming use. (b) A foreign trademark having international repute that extends beyond the borders of the country of origin, except pursuant to a request by the original owner. (c) A mark that is void of any distinguishing attribute or feature; a mark that is composed of statements that are no more than appellations accorded by usage to such goods, products or services; or a common drawing or ordinary image of the goods or products. (d) Any mark that is offensive to public morals or contrary to public order. (e) A public emblem, flag or symbol, or any imitation thereof, of the State, of an Arab or international organization or any establishment thereof, or of any foreign state, except with authorization there from. (f) The Red Crescent or Red Cross symbol or other symbol similar thereto, or a mark in imitation thereof. (g) A mark that resembles or is similar to a symbol that has purely religious associations (h) A geographic name, if its use creates confusion in relation to the origin or source of the goods, products or services. (i) The name, surname, image or emblem of a third party, unless such third party or his heirs should preliminary agrees to use of the mark. (j) A mark that deceives the public or that contains false statements with regard to the origin, source or other characteristics of the products or services; and similarly a mark that contains a fictitious, imitative or forged commercial name. (k) A mark owned by a national or juristic person with whom transactions are prohibited.

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(1) A mark the registration of which in respect of certain classes of goods or services may lead to a decrease in value of other products or services that such mark distinguishes. (m) A mark that includes the following words or expressions: "privilege," "privileged," "registered," "registered drawing," "copyright," "imitation is forgery" or similar words and expressions. (n) A statement relating to an honorary degree, the attainment of which the applicant for registration cannot prove by lawful means. Requirement for trademark application Annex 2 of this document lists the information required in a trademark application. Fees payable for trademark registration Annex 3 of this document lists fees payable for trademark applications, registrations and other associated matters. Renewal of trademark registrations If the Ministry has not received a renewal application for a particular mark, the Ministry must notify the owner of the mark in writing at the address listed on the registration of the expiration of the period of protection of the mark. This notification must be sent during the month following the expiration of the protection period. If the owner of the mark does not submit an application for renewal within three months following the date of expiration of the protection period, the Ministry will delete the registration. If a registration of a trademark is deleted, it may not be re-registered by a third party in connection with the same products or services until the expiration of three years from the date of the deletion. Trademark registrations may be renewed for subsequent ten year periods, provided that renewal applications are submitted to the Ministry during the final year of a valid registration period. Renewals are provided without additional examination by the Ministry, and without permitting third parties to object to such renewal. Renewal applications must be based on the mark as originally registered, without revisions to the mark and without making any additions to the list of products or services in connection with which the mark was registered. Rights and remedies under the protection of registered trademarks The UAE courts have been active in reviewing trademark infringement cases. Local authorities in several of the emirate level ministries now have personnel and training to provide for immediate action in raiding warehouses, seizing goods and levying fines on offending parties. Certain police departments are equipped with laboratories to examine counterfeit goods and to provide detailed reports on the differences and similarities between genuine and counterfeit trademarks.

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A trademark owner may file a suit in civil court to demand compensation for damages suffered. Prior to or during such an action, the owner may obtain a preliminary attachment order against the counterfeit goods. Trademark owners may also apply to the court to issue a precautionary attachment order against all inventory, equipment and tools used to manufacture counterfeit goods. Store signboards, packaging, labels and other items which bear the infringing mark may also be seized. Main actions must follow precautionary attachments within ten days of issuance of the precautionary order. The opposing party has the right to file a counterclaim against the trademark owners for damages if the main action is not filed within the time period stipulated. In some cases, successful plaintiffs receive court orders for the destruction of the goods attached and compensation for damages. Furthermore, courts are empowered to order the offending parties to terminate their production of the counterfeit goods and will publish their decisions in local newspapers as a means of alerting the public to the offenses which have transpired. Repeat offenders may also have their trade licenses suspended, thus preventing them from conducting further business in the UAE. Cancellation of trademark registration in the UAE The UAE trademark law provides the following grounds upon which trademark registrations can be canceled: a. b. c. d. Issuance of a court order to delete a registration due to lack of use of the mark for a time period of five consecutive years; Non-payment of renewal fees; A request by the registered owners; or Issuance of a final court judgment finding that the mark was wrongfully registered. Registration cancellations must be announced in the UAE Official Gazette. Use of a trademark by a third party UAE trademark regulations require licenses for the use of a trademark to be registered with the Trademarks Section of the Ministry. Such licenses must be established in accordance with written and legally authenticated agreements. The registration of a licensing agreement may be canceled upon the request of either party, provided that the request contains documented proof of the expiration or termination of the licensing agreement. Non-canceling parties have the right to object to such cancellations. The Trade Control Department of the Ministry decides on such objections. These decisions may be appealed to a Ministry committee and then to a competent court.

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Transfer of the ownership of trademark The trademark regulations provide for the transfer of trademark ownership, as well as the mortgaging of a trademark. The transfer of ownership of a commercial establishment is deemed to include the transfer of the trademarks registered in the name of the transferor, if the marks are considered to have an established relationship with the enterprise, unless the parties specifically agree to the contrary. If the ownership of the commercial establishment is transferred without the transfer of the mark, the transferor may continue to use the mark in connection with the products or services concerning which the mark was originally registered, unless the parties specifically agree to the contrary. A transfer of ownership of a mark or a mortgage of a mark may not be asserted against third parties until such transfer or mortgage has been registered in the Trademarks Register and publication thereof is accomplished in accordance with the regulations. The period for licensing the use of a mark may not exceed the period of protection of the mark. Licensees may not transfer the license to third parties or grant sub licenses unless the licensing agreement specifically provides that they may do so.

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ANNEX 1 The following material must accompany an application trademark: (a) 14 copies identical to the form of the mark affixed to the application for registration. These drawings may be in color or in black and white and should be printed on 6 x 4 cm. size paper. (b) If the applicant is a company: (i) A copy of the company's memorandum and articles of association or the equivalent corporate charter document. (ii) A certificate of registration or incorporation, commercial registration certificate or an equivalent thereof. (iii) A listing of the current directors constituting the board of directors. This listing should be drafted and certified by the corporate secretary of the company. (iv) A copy of an extract showing details of the company's share capital. If information concerning the number(s) and class(es) of shares issued and the amount of paid up share capital of the company is not contained in the articles of incorporation, a statement certified by the corporate secretary providing this information would be acceptable. (c) A power of attorney, if the application is to be submitted by a law firm on behalf of the applicant. (d) A trademark registration certificate from the country of origin. If the trademark has been registered or an application has been filed, a copy of the registration certificate or application should be provided. (e) If the mark includes one or more words written in a foreign language, a certified translation in Arabic must also be submitted. Such translation may be arranged in the UAE. (f) In the case of applicants who are UAE companies, the Ministry also requires an undertaking specifically stating: (i) that the company owns or is licensed to use the trademark and that it is authorized to manufacture or sell goods or offer services in connection with the trademarks concerned; or that to the best of the company's knowledge the mark is not pending registration, is not being used and has not been registered in the UAE or in any other country.

(ii)

Documents listed in paragraphs (b), (c) and (d) must be notarized and certified up to the UAE Embassy in the applicant's home country. The legalization process is then completed at the Ministry of Foreign Affairs in the U.A.E.

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ANNEX - 2 The following information is required to complete an application to register a trademark in the UAE: a. The applicant's name, surname, profession, and trade name, if any; and, if the applicant is a company, its name or address and its form and object(s). b. c. d. The citizenship of the applicant, place of residence and nature of business. The mark to be registered. A description of the goods or services to which the mark applies, together with the classification number of the International Class of Products and Services to which the mark pertains. This description must be specific. General descriptions such as "... and all other goods included in Class 21" are not normally acceptable to the Registrar. The location of the commercial premises or production facility which uses the mark or desires to use it in distinguishing its goods or services. The address in the United Arab Emirates, if any, selected for sending correspondence and documents concerning the registration. The signature of the applicant or the applicant's representative; and if the application is submitted by a company or an establishment, then the signature of its authorized representative.

e. f. g.

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ANNEX 3 Fees associated with trademark registrations in the UAE are payable as follows (US$1.00 = approximately AED 3.68): Preliminary Search Local legalization of documents Articles of Incorporation Others (each) Translation charges (per page) Application Publication charges (total) Registration 250.00 AED 1,000.00 AED 5-20 100.00 AED 500.00 AED 2,100.00 AED 5,000.00 AED

Annex 4
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Relevant Trade Fairs Name: Venue: Date: Open Hours: Venue: Organiser: The Franchising Middle East 2006 Dubai World Trade Centre 6th - 8th March 2006 10:00 hrs 13:00hrs 16:30 hrs 20:30 hrs Hall 1, Dubai International Exhibition Centre, Dubai, UAE International Expo-Consults L.L.C. P.O. Box 50006 Dubai United Arab Emirates Tel: +9714 - 3435777 Fax: +9714 - 3436115 E-mail: iec@emirates.net.ae Website: www.iecdubai.com

Franchising Middle East (FME 2006) will feature a large number of Franchise concepts, Brands, Products and Services from the local and international market and will prove to be the perfect meeting place for interested Franchisee seekers to evaluate, choose and acquire franchise and business opportunities in the Middle East. Recently, FME 2005, a three-day event, organized and supported by the Mohammed bin Rashid Establishment for Young Business Leaders attracted more than 80 exhibitors from various countries.
Welcome

Annex 5

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Relevant Authorities Chamber of Commerce & Industry in UAE H.E. Mohd. Omar Abdullah Director General Abu Dhabi Chamber of Commerce & Industry P.O. Box 662 Abu Dhabi U.A.E. Tel: + 971 2 621 4000 Fax: + 971 2 621 5867 E-mail: services@adcci.gov.ae Website: www.adcci-uae.com H.E. Saeed Obaid Al Jarwan Director General Sharjah Chamber of Commerce & Industry P.O. Box 580 Sharjah U.A.E. Tel: + 971 6 568 8888 Fax: + 971 6 554 1119 E-mail: scci@sharjah.gov.ae Website: www.sharjah.gov.ae H.E. Khalid Mohamed Jassim Director General Fujairah Chamber of Commerce & Industry P.O. Box 738 Fujairah U.A.E. Tel: + 971 9 222 2400 Fax: + 971 9 222 1464 E-mail: chamberfcci@emirates.net.ae H.E. Humaid Mohd. Ali Bin Salem Director General Umm Al Quwain Chamber of Commerce & Industry P.O. Box 436 Umm Al Quwain U.A.E. Tel: + 971 6 765 1111 Fax: + 971 6 765 5055 E-mail: uaqcci@emirates.net.ae Chamber of Commerce & Industry under MATRADE Dubai Area of Coverage H.E. Abdul Rahman G. Al Mutaiwee Director General Dubai Chamber of Commerce & Industry P.O. Box 1457 Dubai U.A.E. Tel: + 971 4 228 0000 Fax: + 971 4 221 1646/ + 971 2 202 8533 (dir.) P.A. to D.G. E-mail: dcciinfo@dcci.gov.ae Website: www.dcci.org H.E. Mohd. Abdullah Al-Hemani Director General Ajman Chamber of Commerce & Industry P.O. Box 662 Ajman U.A.E. Tel: + 971 6 742 2177 Fax: + 971 6 742 7591 E-mail: ajmchmbr@emirates.net.ae Website: www.ajcci.co.ae. H.E. Ali Mohamed Ali Al Haranki Director General Ras Al Khaimah Chamber of Commerce, Industry & Agriculture P.O. Box 87 Ras Al Khaimah U.A.E. Tel: + 971 7 233 3511 Fax: + 971 7 233 0233 E-mail: rccia@rakchamber.ae Website: www.rakchamber.ae

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Mr. Abdurahim Hassan Naki General Manager Bahrain Chamber of Commerce & Industry P.O. Box 248 Bahrain Tel: + 973 17 229 555 Fax: + 973 17 224 985/ 212 937 E-mail: bahcci@batelco.com.bh Mr. Mohd. Bin Nasser Al Shoraiqi Director General Oman Chamber of Commerce & Industry P.O. Box 1400 RUWI Postal Code 112 Sultanate of Oman Tel: + 968 707 684/ 00 968 799 146/ 702 008 Fax: + 968 792 359 E-mail: pubrel@ omanchamber.org Website: www.omanchamber.org

Mr. Ibrahim Yousef Fakhro Director General Qatar Chamber of Commerce & Industry P.O. Box 402 Doha Qatar Tel: + 974 462 1131 Fax: + 974 466 1697 Mr. Ahmad Rashid Al Haroun Director General Kuwait Chamber of Commerce & Industry P.O. Box 775 Safat (Code 13008) State of Kuwait Tel: + 965 243 3854/ 5/ 7 Fax: + 965 240 4110 / 243 3858 E-mail: kcci@kuwait-chamber.com.kw Website: www.kcci.org.kw

Prepared by: MATRADE Dubai June 2005

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