Dubai: Starting a new business can be an overwhelming experience – from getting your business model right to finding a strong customer base, there is a lot to juggle. But one decision that you should also pay particular attention to is the licence that you apply for. Should it be in the free zone or the mainland? If it is in a free zone, which free zone should you select?
A Gulf News reader shared her experience starting a food business in the UAE and asked: “I started a food business with a licence from a Sharjah free zone. I then started working out of a cloud kitchen that is on the mainland. When trying to list my business on food delivery apps, I was unable to get my request accepted and was later informed that this is because my licence is from a free zone. What can I do?”
Gulf News spoke with business set up consultants in the UAE, to find out how a free zone licence works and what business owners should keep in mind when selecting the best licence for their business.
Responding to the reader’s query, Suchitra Ravi, corporate structuring manager at Sovereign PPG Corporate Services, said that if a food business is denied the ability to list on a food delivery app, there could be various factors at play, other than the jurisdictional location of the business.
“This will depend on the details of the individual application,” she said.
However, she clarified that businesses with a free zone licence can list on food delivery apps, stating: “It is possible to list a food business on a delivery app if the food business is licenced in a free zone. Companies, such as Noon, Careem or Deliveroo, will likely have both free zone and mainland licences through which you can register your food business with them.”
Maximising reach: Matching free zone licences with delivery apps
She advised business owners with licences in a free zone to register with a delivery app that is also registered within a free zone. This ensures that consumers can also easily order from your business.
“Consumers using food delivery apps will likely be able to order from all businesses registered with the delivery company, from both free zone and mainland establishments. Those businesses who are appropriately registered with the food delivery companies would only need to engage with providing the food delivery company with the consumer’s order,” she said.
All the experts who spoke with Gulf News highlighted the need for entrepreneurs to conduct thorough research before picking a free zone that they want to operate out of, as each free zone has been strategically built for specific industries.
Consumers using food delivery apps will likely be able to order from all businesses registered with the delivery company, from both free zone and mainland establishments. Those businesses who are appropriately registered with the food delivery companies would only need to engage with providing the food delivery company with the consumer’s order.
Explaining the overarching rule that businesses should know about free zones and the mainland, Syed Fahim, business consulting manager at Consult Zone Business Solution Experts, said: “If you establish a company in mainland you can function across UAE. If you are a company that is in a free zone, then the cloud kitchen must be in free zone, or you could partner with delivery apps licensed in the free zone. By definition, a mainland company can function anywhere within the UAE or overseas, whereas a company in a free zone can operate within free zones or through a distributor licensed to operate on the mainland.”
For a food business, this would mean either using the services of a cloud kitchen, or a delivery service provider, that is licensed in the free zone, as well as on the mainland.
“The second option is registering a branch on the mainland, which would allow them to function from any cloud kitchen,” he added.
This is a demographic-centric business, so you should choose a cloud kitchen in the area that you want to cater to. If the client base is in Dubai, you should go for a licence in Dubai. In fact, if it is in a certain location in Dubai, go for a cloud kitchen in the area.
Beyond free zone vs mainland: Choosing the right location
He highlighted the need for businesses, especially food businesses, to be strategic in selecting the location that is closest to its target market.
“This is a demographic-centric business, so you should choose a cloud kitchen in the area that you want to cater to. If the client base is in Dubai, you should go for a licence in Dubai. In fact, if it is in a certain location in Dubai, go for a cloud kitchen in the area,” he said.
Faizan Khan, marketing manager at Consult Zone Business Solution Experts, also advised entrepreneurs to consider which free zone would be most suited for their business.
“We deal with all the free zones as well as the mainland, and each free zone has its own perks. The government has created these different hubs, and while they do allow many activities to be registered, you need to look at which free zone would be suitable for your business activity. If you want a business that is scalable, a mainland licence is better,” he said.
“These rules are not specific to the food industry and in fact extend to other businesses like real estate, car rental companies or even automobiles trading. A mainland company may operate with other companies across the UAE, whereas a free zone licence holder would only be able to register themselves with delivery apps based out of the free zone. For example, if you have a cloud kitchen in Dubai Silicon Oasis, you may register yourself with delivery apps in Meydan or Dubai Multi Commodities Centre (DMCC),” he added.
A mainland company may operate with other companies across the UAE, whereas a free zone licence holder would only be able to register themselves with delivery apps based out of the free zone.
He added that there are other factors that come into play as well, when deciding on the best jurisdiction for your business. Will you need an office, or will you be working remotely? How many employees, partners or managers will the company have? Some business activities may require additional approvals as well.
Getting a consultation from business set up experts can help get a clearer picture on which licence would make most sense for you, and many consultancies even offer free consultations to help you make a better decision as you set up your operations in the UAE.
