Buying a Franchise in Egypt: Agree the Fee Currency and Exchange Rate

Franchise fees may look straightforward in a financial proposal, yet their actual cost can change if the contract links them to a foreign currency or leaves the conversion date unclear. When buying a franchise in Egypt, agreeing the fee amount or percentage is not enough: you also need to specify how fees will be calculated and paid. A clear mechanism protects cash flow and reduces disputes within the franchise network, particularly when the outlet earns revenue in Egyptian pounds but owes the franchisor payments in another currency.

Distinguish between the pricing currency and the payment currency

Start by listing all your financial obligations to the franchisor in a separate table, rather than focusing solely on royalties. Include the initial franchise fee, recurring fees, system subscriptions and any paid additional services. For each obligation, record the currency in which the amount is set, the invoice currency, the payment currency and the due date.

These are not interchangeable. A fee may be set in a foreign currency while the contract allows payment of its equivalent in Egyptian pounds. Alternatively, royalties may be calculated as a percentage of sales in Egyptian pounds and then converted into another currency. In the latter case, ask about the order of calculation: are the fees calculated in pounds first, or are sales converted before the percentage is applied?

Ask the franchisor for a sample invoice and a worked example for each type of fee. Your accountant should be able to reproduce the calculation from clear documentation, without relying on a verbal explanation or an exchange rate visible only in the franchisor’s system. Any temporary fee reduction should also specify the currency in which it applies.

Understand Egypt’s legal framework before agreeing terms

Egypt has no standalone franchise law or general franchise-specific regime requiring a standardised pre-contract disclosure document or registration of franchise offers with a specialist authority. Do not therefore assume that the franchisor is automatically obliged to provide a particular local form explaining currency risks. Request the details in writing and include the agreed mechanism in the contract.

Depending on its substance, the relationship is governed by Civil Code Law No. 131 of 1948 and Commercial Law No. 17 of 1999, alongside other relevant legislation. If the arrangement qualifies as a technology transfer, specific provisions may apply, including certain disclosure obligations. These do not, however, constitute a comprehensive disclosure regime for all franchise agreements.

Payments and transfers must also comply with the Central Bank and Banking System Law No. 194 of 2020 and current banking rules. Specifying a foreign currency in the contract does not mean that every proposed payment method is permitted or available. Have an Egyptian lawyer review the wording, and ask the bank in advance about the transfer documents and procedures required for the type of payment and beneficiary involved.

Specify the exchange-rate source and calculation date

The phrase ‘at the prevailing exchange rate’ does not settle how the calculation will work. Negotiate a verifiable reference source, specifying the appropriate rate for the transaction and when it will apply. If both parties agree to use a published reference rate, check that its use is compatible with the actual payment method and the bank’s requirements.

The clause should answer the following questions:

• Will the rate be taken from the invoice date, the due date or the date the transfer is executed?
• What happens if that date falls on a holiday or the reference rate is not published?
• Who bears any difference between the reference rate and the rate applied by the bank?
• How will an invoice be corrected if it contains a conversion error?
• Is there a clear fallback mechanism if the agreed reference rate is discontinued?

Test the wording against different scenarios: payment on time, early payment, a corrected invoice and a delayed transfer. If the franchisor can choose the date or reference source unilaterally, ask for that discretion to be replaced with a fixed rule. The aim is not to guarantee a future exchange rate, but to prevent the calculation method from changing after the obligation arises.

Allocate transfer charges and responsibility for delays

The amount debited from your account may differ from the amount credited to the franchisor’s account because of charges levied by banks involved in the transfer. Specify whether your obligation is to send the amount due or to ensure that it arrives in full, who bears each category of charges, and what evidence is required for any claim for additional amounts.

Also agree which document proves that payment has been initiated and which proves that it has been completed. Submitting a transfer instruction does not always mean that the funds have arrived, so the contract needs to address the period between those events rather than automatically treating it as a breach on your part.

Distinguish between delays caused by insufficient funds, delays caused by a document the franchisor has failed to provide, and banking delays despite a complete set of documents having been submitted. Negotiate a procedure for notification, exchanging documents and resolving delays, specifying how each situation affects any late-payment penalties. Do not rely on a promise that ‘transfers never get held up’. Ask for a commitment from the franchisor to cooperate and to keep beneficiary details up to date and verify them securely.

Test the financial impact, then put protections in writing

Ask your accountant to prepare exchange-rate scenarios without treating them as certain forecasts. Test their effect on fees payable, cash flow and the outlet’s ability to meet its local obligations. If fees are a percentage of revenue in Egyptian pounds, do not assume that currency movements will have the same effect as they would on a fixed foreign-currency fee. Examine the contractual formula first.

You may be able to negotiate a review mechanism for significant changes, a different payment schedule or a contractual cap on certain exchange-rate differences, provided the franchisor agrees and the wording complies with the law. These are negotiated protections, not automatic rights. If the contract provides for renegotiation, specify what happens if the parties cannot reach agreement.

The practical takeaway: Do not sign until you and your accountant can calculate the fees in the same way and the bank has confirmed the requirements for making the payments. Put the currency, reference rate, calculation date, charges and responsibility for delays in writing rather than relying on verbal discussions.