Practice Area
Franchising
We structure, document and defend franchise networks in Pakistan — for brand owners expanding through franchisees, and for franchisees signing up to someone else's system. Pakistan has no franchise statute, so the agreement carries the entire relationship, and we build it to carry that weight.
Franchising in Pakistan is contract work all the way down. There is no franchise statute, no disclosure regime and no regulator of the relationship — as of mid-2026, none is pending in any advanced form that we would rely on. That is not a gap to lament; it is the design constraint. Everything a franchise law would do elsewhere — disclosure, registration, relationship rules, termination protections — has to be done here by the agreement itself, or it is not done at all.
So we build the architecture that substitutes for the missing statute. The trademark licence does the work a franchise registration would do, anchored in the Trade Marks Ordinance, 2001. The operations manual, wrapped in confidentiality obligations, does the work of a know-how regime. A voluntary disclosure pack does the work of a disclosure law, and protects the franchisor as much as the franchisee, because it fixes the record of what was promised. The Contract Act, 1872 supplies the frame; the drafting supplies everything else.
The order of operations matters more in this practice than in most. Brand first: a franchise granted over an unregistered mark is a licence of nothing in particular, and Pakistan's register contains enough opportunistic filings that international brands should assume nothing. Structure second: fees, territory, supply and pricing, tested against the Competition Act, 2010 while they are still easy to change. Paper third. Cross-border machinery — State Bank remittance and withholding tax — alongside the paper, never after it, because a royalty that cannot be remitted is a default with extra steps.
We act on both sides of the table. For franchisors, the recurring work is network discipline: consistent documents, watched deadlines, terminations run by the book, and the brand policed. For franchisees, the work is diligence and negotiation — confirming the rights exist, resizing foreign-precedent documents to Pakistani law, and making sure the exit terms are survivable, because every franchise ends eventually and the agreement is read most carefully on the day it does.
The disputes side of the practice informs the drafting side. Having sought injunctions against ex-franchisees trading on a lookalike name, we know which clauses the court actually reads and which recitals it ignores, and we draft accordingly. Everything on this page is stated as of mid-2026; the foreign exchange and tax parameters in particular move, and we confirm them at the time of each engagement.
When Businesses Need This
The moments this practice exists for.
- 01You have built a food, retail or services brand and want to expand through franchisees instead of company-owned outlets.
- 02An international franchisor has offered you a master franchise for Pakistan and the document runs to ninety pages, governed by foreign law, drafted for a country with disclosure statutes Pakistan does not have.
- 03A franchisee is using your name, recipes, suppliers and fit-out but has stopped paying royalties or reporting sales.
- 04You are about to sign a franchise agreement and nobody has checked whether the franchisor actually owns the trademark in Pakistan.
- 05Your network has grown to a dozen outlets and territory, pricing and quality disputes are starting to surface between franchisees.
- 06You need to remit franchise fees and royalties to a foreign franchisor and the bank has asked for approvals and documents nobody mentioned at signing.
- 07A terminated franchisee has reopened two streets away under a lookalike name, with your trained staff and your supplier list.
How It Works
The process, stage by stage.
1
Brand and rights audit
Before anyone grants or takes franchise rights, we confirm what actually exists. We check the trademark registrations at the Trade Marks Registry — classes, ownership, status, renewals — and the copyright position in manuals, menus, artwork and fit-out designs. A franchise built on an unregistered or wrongly held mark is a dispute waiting for a date.
2
Structure
We settle the model before the drafting: single-unit, multi-unit, area development or master franchise; the fee architecture of initial fee, continuing royalty and marketing fund; and the supply and pricing arrangements. Exclusive territories, tying and resale pricing are tested against the Competition Act, 2010 at this stage, not after the Competition Commission asks.
3
Documentation
We draft the franchise agreement under the Contract Act, 1872, together with the trademark licence, the confidentiality and know-how provisions around the operations manual, and any supply and fit-out agreements. Pakistan imposes no mandatory pre-contract disclosure, so we build a voluntary disclosure pack for franchisors who want a defensible record of what was represented.
4
Regulatory and cross-border layer
For inbound franchises we handle the machinery that makes fees actually move: remittance of franchise fees and royalties through authorized dealers under the State Bank of Pakistan's foreign exchange framework, withholding tax on payments to the non-resident franchisor under the Income Tax Ordinance, 2001, and recordal of the trademark licence where advisable. Signing an agreement the banking system will not service is a common and avoidable failure.
5
Network administration
A live network needs renewals, transfers, consents to sale of franchised businesses, default notices and variations handled on consistent paper. We maintain the precedent set so that the fiftieth agreement still matches the fifth, and so that a concession given to one franchisee does not silently rewrite the deal for all of them.
6
Enforcement and exit
When a franchisee defaults or the relationship ends, we run the termination mechanics the agreement prescribes — notice, cure period, consequences — and then the de-branding: signage down, marks off, confidential materials returned, injunction sought where the ex-franchisee keeps trading on the brand. Termination done out of sequence converts a strong case into a weak one, so we insist on the sequence.
The Legal Framework
The law this work runs on.
- Contract Act, 1872
- As of mid-2026 Pakistan has no franchise-specific statute, so the Contract Act is the governing law of every franchise agreement: formation, performance, breach and damages exist only as the contract creates them. Section 27, which voids agreements in restraint of trade subject to narrow exceptions, is the single biggest constraint on post-term non-compete clauses.
- Trade Marks Ordinance, 2001
- The franchised brand lives or dies under this Ordinance — registration, licensing, infringement and revocation. The Ordinance permits trademark licensing; whether and how a franchisee's licence should be recorded with the Trade Marks Registry, and the effect of recordal, is a point we settle per engagement [RECORDAL REQUIREMENTS AND EFFECT — TO BE VERIFIED].
- Copyright Ordinance, 1962
- Operations manuals, training materials, menu artwork, packaging and fit-out drawings are protected as works under this Ordinance without registration, though registration with the Copyright Office adds evidentiary weight. The manual is usually where the system's know-how actually sits, so we treat it as a legal document, not a binder.
- Competition Act, 2010
- The Competition Commission of Pakistan can reach franchise networks through the prohibition on anti-competitive agreements: exclusive territories, tying of supplies and resale price maintenance all need testing against the Act. Network-wide pricing directions are a recurring risk area.
- Foreign Exchange Regulation Act, 1947 and the State Bank of Pakistan's Foreign Exchange Manual
- Outward remittance of franchise fees, royalties and technical fees to a foreign franchisor runs through authorized dealers under the SBP's foreign exchange framework, historically Chapter 14 of the Foreign Exchange Manual. The current parameters, caps and registration steps for franchise remittances must be confirmed at the time of structuring [REMITTANCE PARAMETERS — TO BE VERIFIED].
- Income Tax Ordinance, 2001
- Payments of royalties and fees for technical services to a non-resident franchisor attract withholding tax, subject to relief under an applicable double taxation treaty. The rate and treaty position are confirmed per transaction [RATES AND TREATY RELIEF — TO BE VERIFIED].
- Specific Relief Act, 1877
- Injunctions against an ex-franchisee still trading on the brand are sought under this Act alongside the Trade Marks Ordinance, 2001. Interim relief is usually the remedy that matters; damages come later, if at all.
- Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011
- Master franchise agreements with foreign franchisors commonly choose foreign-seated arbitration; this Act gives effect to the New York Convention in Pakistan, making foreign awards enforceable here in a way foreign court judgments often are not. Dispute clauses are drafted with that enforcement reality in view.
Statutory references are stated as of the page’s as-of date and flagged where verification is pending; the law moves, and the current position should be confirmed before relying on it.
Common Mistakes
The errors we see most — and their price.
- Signing a master franchise for Pakistan without confirming the franchisor's trademark is registered here — many international marks are not, and some are already registered by someone else.
- Copying a US or UK franchise agreement whose post-term non-compete would likely fail under section 27 of the Contract Act, 1872.
- Granting exclusive territory in a meeting or an email while the signed agreement says something narrower — the paper wins.
- Treating the operations manual as an afterthought when it is the only place the system's know-how is defined, owned and kept confidential.
- Letting franchisees register your trademark, trade name, domain or social media handles in their own names because it was quicker at the time.
- Directing resale prices across the network without testing the arrangement against the Competition Act, 2010.
- Agreeing royalty and fee terms the State Bank's remittance framework will not support, so the franchisee is in payment default from the first invoice.
- Terminating a franchisee without following the agreement's notice and cure sequence, and handing them their best argument.
Representative Scenarios
The shape of the work.
Illustrative scenarios, not case reports — composites drawn to show how matters of this kind run.
- —Illustrative: a Lahore restaurant group converting to a franchise model discovered during the rights audit that neither of its two brands was registered; the marks were filed at the Trade Marks Registry first, and the franchise agreements were drafted to work while the applications were pending.Illustrative
- —Illustrative: a Pakistani master franchisee of a foreign quick-service brand renegotiated a governing-law and dispute clause from foreign courts to arbitration enforceable under the 2011 Act, after being shown what enforcing a foreign judgment in Pakistan would actually involve.Illustrative
- —Illustrative: a franchisor terminated a persistently defaulting outlet strictly per the contract's notice and cure mechanics, then obtained interim relief when the ex-franchisee continued trading under a lookalike name.Illustrative
- —Illustrative: a retail franchisor restructured its supply and pricing terms across the network after advice that its mandatory resale prices sat badly with the Competition Act, 2010, moving to recommended prices and revised supply terms.Illustrative
Questions, Answered
What clients ask about franchising.
No. As of mid-2026 Pakistan has no franchise-specific statute, no mandatory disclosure document and no franchise regulator. Franchise agreements are ordinary contracts under the Contract Act, 1872, which means every protection either side wants must be written into the document — nothing is implied by a franchise code, because there is none.
There is no general registration requirement for the franchise agreement itself. Two adjacent steps matter: recordal of the trademark licence with the Trade Marks Registry can be advisable [RECORDAL POSITION — TO BE VERIFIED], and cross-border fee remittance requires the documentation the authorized dealer bank and the State Bank framework demand. Neither makes the contract valid or invalid; both affect how well it works.
A post-term non-compete faces section 27 of the Contract Act, 1872, which voids agreements in restraint of trade subject to narrow exceptions, so a bare promise not to compete after termination is vulnerable. What is enforced in practice is the brand and the confidences: trademark infringement and passing-off claims under the Trade Marks Ordinance, 2001, and breach of confidentiality over the manual and know-how. We draft with that enforcement route in mind from the start.
Yes, through an authorized dealer bank under the State Bank of Pakistan's foreign exchange framework, with withholding tax applied under the Income Tax Ordinance, 2001 subject to treaty relief. The permitted structures, any caps and the approval steps are confirmed at the time of the transaction [PARAMETERS — TO BE VERIFIED]. The point to hold onto is that remittance is designed into the deal, not discovered after signing.
Then the franchisee is paying for rights that may not exist here, and the brand is exposed to prior filings by third parties. An unregistered mark can still support a passing-off claim if there is local reputation, but that is a harder, slower case than infringement of a registration. For a franchisor, filing before franchising is the rule; for a franchisee, checking the register before signing is the corresponding rule.
Foreign franchisors usually insist on their home law, and Pakistani courts generally respect a genuine choice of foreign law in commercial contracts. The practical question is enforcement: a foreign court judgment is hard to enforce in Pakistan, while a foreign arbitral award is enforceable under the 2011 Act. So the dispute clause matters more than the governing-law clause, and we negotiate it that way.
Exactly the way the agreement says: the specified notice, the cure period, then the consequences of termination — royalty settlement, de-branding, return of materials, handover or closure of the outlet. Courts take the sequence seriously, and a franchisor who skipped a step gives the franchisee a foothold. Where the ex-franchisee keeps using the brand, an injunction under the Specific Relief Act, 1877 and the Trade Marks Ordinance, 2001 is the immediate remedy.
A master franchise puts one Pakistani counterparty between the brand and the outlets, which simplifies remittance, enforcement and oversight but concentrates risk in a single relationship. Direct franchising keeps control but requires the franchisor to administer many Pakistani contracts and payment flows itself. Most foreign entrants we see choose a master or area-development structure; the right answer depends on how much local infrastructure the franchisor is willing to build.
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Prepared by The First Counsel · As of 2026-07-12 · Pending professional review — statements flagged in the text are being verified
This publication is provided for general information only. It is not legal advice, and neither reading it nor corresponding with the firm about it creates a lawyer–client relationship. The position stated must be verified against current law before it is relied upon.