There are no specific laws covering franchises in Kuwait. Instead, they are covered by laws regulating agency law. Franchisors are required to pay income tax, and until this is paid the franchisee is required to set aside a 5% retainer from monies paid to the franchisor; and so essentially pay the franchisor 95% of monies owed, until the Kuwait tax authority confirms they may pay the remainder.

All agreements must be in writing and set out the specific conditions of the agreement. Agreements must be made in good faith and must adhere to competition law and Kuwait's principles of morality.

Failure to renew the contract by the franchisor may result in compensation in favour of the franchisee.

This Practice Note covers:

• legal obligations for an agreement;

• income tax;

• registration of agreements;

• good faith and competition law; and

• morality and arbitration.

Franchisor: A person or company that grants a franchise.

Franchisee: An individual or company that holds a franchise for the sale of goods or the operation of a service.