Buying a Franchise in Egypt: What Happens If Your Outlet Is Forced to Close?

You may choose the right brand and successfully open your outlet, only for a public authority’s decision or an incident beyond your control to prevent you from welcoming customers. In this situation, simply having a ‘force majeure’ clause in the contract is not enough. What matters is knowing which obligations are suspended, which payments continue and when you can end the relationship if the disruption persists. Agreeing in advance how these risks will be shared helps protect both parties, rather than leaving them to negotiate during a crisis.

Understand the difference between impossibility and operational difficulty

Egypt has no standalone franchise law, nor a general franchise-specific framework requiring a standard disclosure document or registration of the franchise agreement with a dedicated franchise authority. The relationship is governed by general legal rules, principally Civil Code Law No. 131 of 1948 and Commercial Law No. 17 of 1999, with other laws applying according to the nature of the business and the agreement.

When it comes to disruption, the Civil Code distinguishes between an obligation becoming impossible to perform because of an external cause and exceptional, unforeseeable circumstances of a general nature that make performance onerous and threaten the party owing the obligation with severe loss, without making performance impossible. Each situation has different conditions and consequences. In the second case, a judge may be able to reduce the onerous obligation to a reasonable level, subject to the relevant legal requirements; it does not automatically release a party from its obligations.

Do not, therefore, treat falling sales or rising costs as force majeure simply by labelling them as such. Nor should you assume that a ban on admitting customers makes every contractual obligation impossible to perform, particularly if deliveries remain permitted. Ask your lawyer to assess the event’s effect on each obligation and the limits of any clause that shifts the risk of an external cause onto you.

You should also distinguish between a general closure beyond your control and a closure resulting from a breach specific to your outlet, such as failing to obtain a required licence. The contract should not treat these situations as identical.

Define the scope of disruption and the obligations affected

Review the definition of a disruptive event: does it cover mandatory closure orders, incidents that prevent use of the premises and interruptions to essential utilities? Ideally, the clause should give examples without making the list exhaustive, and its application should depend on a genuine, demonstrable effect on performance—not simply on an event occurring in the area.

Then ask for a contractual schedule setting out what happens to obligations during a full or partial closure, particularly:

• Fixed minimum royalties, even when sales are zero.
• Technology subscriptions and fees for services that remain available in practice.
• Regular purchases and minimum stock order requirements.
• Performance and sales targets linked to the continuation of the franchise.
• Marketing contributions payable while trading is suspended.

Distinguish between waiver and deferral: a waiver cancels the amount covered by the agreement, whereas deferral builds up a debt payable later. If fees are to be deferred, ask for a realistic repayment schedule after reopening and establish whether interest, charges or penalties will apply.

Do not assume that an arrangement with the franchisor suspends the rights of your landlord, bank or suppliers. The franchise agreement does not amend their contracts. These separate obligations must be reviewed when assessing the cash needed to get through the disruption.

Agree practical notice and evidence requirements

An otherwise useful clause can become difficult to rely on if it requires immediate notice through a channel that is unavailable during the crisis. Negotiate a reasonable notice period starting when you become aware of the event and its effect, clearly specified addresses for notices, and an alternative method if the main channel fails.

Specify the documents required for each type of event, such as a closure order, a report from the relevant authority, correspondence from utility providers or a formal record confirming that access to the premises is impossible. Do not accept a requirement for a particular document that the relevant body cannot issue in the first place. Keep records of lost sales, expenses and the steps you have taken to limit the damage.

The duty to mitigate the effects of disruption also needs to be clear. Will the franchisor temporarily allow deliveries, a limited product range or the transfer of some operations to an approved site? Clearly set out the approvals needed and response deadlines, while maintaining compliance with licensing and safety requirements. An unlawful alternative operating arrangement is not an acceptable contractual solution.

Nor should the duty to provide information fall solely on you. Ask the franchisor to designate a contact person, notify you of interruptions to its own services and help prepare a suitable business continuity plan for the outlet.

Set out a route to reopening or ending the relationship

The end of the disruptive event does not mean the outlet can resume full operations the next day. You may need to inspect equipment, replace spoiled stock and bring back staff and supplies. Agree a recovery period linked to clear steps, along with how the costs of reopening measures required by the franchisor will be shared.

Also discuss how the suspension affects the franchise term: will it be extended by the period of closure, or will the original expiry date remain? An extension is not an automatic right, and it may be of little use if your right to occupy the premises does not continue. Assess its practical value before accepting it as compensation for the disruption.

If the closure continues for an agreed period, set out a process for reviewing the situation and the option to terminate by written notice. Clarify how advance fees for services not delivered, deferred payments and outstanding orders will be settled. Avoid relying solely on the phrase ‘termination without liability’: it does not explain what happens to existing debts or disputed amounts.

The practical takeaway: Before signing, test the contract against both a full-closure and a partial-closure scenario. Ask for written answers to four questions: what is suspended, what must be paid, how do you prove the disruption, and when can you reopen or exit?