Pakistan Franchising Payment Rules
The State Bank of Pakistan (SBP), the country’s regulator that oversees foreign payments and remittance flows, has updated its Foreign Exchange Manual to simplify and modernize the regulations that apply to foreign payments made by franchisees through local Pakistani commercial banks. This is an important development for U.S. franchisors and brand owners, particularly new entrants and international food chains operating in Pakistan. The revisions are expected to bring greater clarity and predictability for businesses by defining clear caps on fees and agreement durations. The revised framework also reduces uncertainty around foreign remittance approvals and helps businesses plan their financial and contractual arrangements more effectively.
On December 19, 2025, the SBP issued revised instructions updating its remittance rules for royalty, franchise, and technical service fees for non-financial sector entities, particularly those with foreign technical, franchise, or brand owners. The amendments increase the cap for new franchise contract payments/fees up to $250,000 (from $100,000) and the cap on ongoing royalty or franchise fees up to eight percent of net local Pakistan sales, for both new and existing franchises, for franchise agreements of up to ten years in duration.
SBP has also determined that the initial one-time fee for new operations must be included within the overall cap of eight percent of net local sales once commercial operations begin, ensuring total expenditure remains within established caps throughout the life of the agreement, rather than creating an additional remittable cost beyond the recurring fee cap.
Category | Lump Sum/Upfront Fee | Recurring Royalty, franchisee, technical fee | Duration of agreement |
|---|---|---|---|
New operations | Up to $250,000/- | Up to 8% of net sales (net after deducting taxes & cost of imported items) | 10 years
(further renewable) |
Existing operations | Not allowed |
Source: State Bank of Pakistan
For example, if a Pakistani franchisee of a U.S. brand pays an initial franchise fee of $50,000 and generates $1,000,000 in net local sales in its first year, the total allowable remittance under the eight percent cap would be $80,000. Since they have already paid $50,000 as the initial fee, they can only remit an additional $30,000 as a recurring royalty payment that year. Per SBP, a franchisee is also allowed to adjust the initial franchise fee over the term of the agreement.
Pakistani commercial banks are required to adhere strictly to the revised guidelines for processing remittances. Pakistani banks involved in these transactions must verify all relevant documentation, ensure that agreement terms are met, check sector eligibility, and confirm fee calculations according to the updated provisions of the SBP’s Foreign Exchange Manual. This focus on compliance highlights the central bank’s goal of maintaining a balance between facilitating transactions and enforcing effective regulatory oversight.
This policy shift is expected to ease financial constraints for U.S. and international franchise brands operating in Pakistan and aligns Pakistan’s franchise regime more closely with international standards, potentially encouraging additional U.S. brands to enter the Pakistani market.
Assistance from the U.S. Commercial Service
The U.S. Commercial Service in Pakistan offers standard as well as customized services and programs to help U.S. businesses succeed in the Pakistan market. For more information regarding programs, services, local trade events, and opportunities, U.S. firms may contact the U.S. Commercial Service Pakistan team at office.pakistan@trade.gov or reach out to your nearest local U.S. Commercial Service office in the United States.