Buying a Franchise in Lebanon: Aligning Your Premises Lease with the Franchise Agreement

You may choose a suitable brand and sign a clear franchise agreement, only to discover that the premises lease prohibits an essential installation or expires before you can recover your investment. In Lebanon’s franchise market, the franchisor’s approval of an address is not enough to protect your position. Both agreements need to be reviewed together so that you can actually operate the outlet throughout the period on which you based your investment decision, without conflicting obligations to the franchisor and the landlord.

1. Understand the legal relationship between the three arrangements

The transaction usually involves three separate relationships: the franchise agreement with the franchisor, the lease with the landlord, and licensing requirements imposed by the relevant authorities. Approval from one party does not automatically bind the others. The franchisor may consider the location commercially suitable, while its proposed use requires additional approvals or conflicts with building restrictions.

Lebanon has no comprehensive franchise-specific law or mandatory disclosure regime dedicated to franchising. Depending on its nature, the relationship is governed by the general provisions of the Code of Obligations and Contracts, the Commercial Code and relevant intellectual property rules. The lease requires a review of both its terms and the legal regime applicable to it, depending on the date of the agreement and the nature of the premises. Do not assume that all commercial leases are treated alike.

There is also debate over whether Legislative Decree No. 34 of 1967 on commercial representation can apply to certain franchise arrangements. Do not, therefore, base the protection of your premises solely on the agreement’s title. Ask a Lebanese lawyer to review both agreements and identify which rights are provided by law and which need to be expressly negotiated.

2. Check that the premises are suitable for the intended use

Start by verifying the landlord’s legal capacity and authority to let the premises, as well as the property boundaries and the areas covered by the lease. Request the appropriate property documents and, if the signatory is an agent or company representative, check their authority. Do not assume that the pavement, roof or car park forms part of the leased premises simply because the previous tenant used it.

Next, turn the brand’s requirements into a clear checklist for an engineer and a lawyer, covering, for example:

• The specific business activity permitted, rather than a general description open to more than one interpretation.
• Installation of signage, the shopfront, ventilation and air-conditioning systems, and associated connections.
• Electrical loads and the locations of equipment and tanks, where required.
• Customer and delivery access, storage areas and access hours.
• Use of common areas and restrictions in the building’s rules.

Ask for the licences and approvals required for the activity and location to be identified, along with who is responsible for obtaining each one. The landlord’s consent to works is not a substitute for a licence, and the franchisor’s approval does not certify that the property is legally or technically suitable. Make the findings of these checks part of your decision to lease before taking on substantial commitments.

3. Align the terms and rights to remain in the premises

Set out the lease commencement date, handover date, date on which rent becomes payable and lease expiry date alongside the start and end dates of the franchise agreement. The lease may begin on signing while your right to operate starts later, leaving you paying for a period in which you earn no revenue. Equally, the franchise term may extend beyond your right to occupy the premises.

Where there is scope to negotiate, seek a lease term that fits your plan for recovering the fit-out costs. If that plan includes an extension option, review how it must be exercised, the notice deadline and how the new rent will be determined. Wording such as ‘renewable by mutual agreement’ does not guarantee that you can stay, because it leaves the future agreement unresolved.

Also examine what happens if you can no longer occupy the premises. Does the franchise agreement allow the outlet to relocate? Who approves the alternative site? What procedures must be followed? The aim is not to guarantee acceptance of any location, but to avoid an obligation to operate somewhere you no longer have the right to use. Do not assume that the end of one agreement automatically terminates the other.

4. Calculate the full occupancy and fit-out costs

Monthly rent is not the only cost associated with the premises. Prepare a schedule covering advance payments, the deposit, shared expenses, maintenance and required works, allocating responsibility between landlord and tenant. Distinguish between repairing an existing defect in the property and carrying out a fit-out required by the brand’s operating model. Do not leave that distinction to a verbal understanding.

Obtain separate quotations for essential works and branded fit-out elements. Establish who owns the equipment and improvements once installed, what can be removed when you leave, and what must remain or be reinstated to its original condition. If the landlord offers a fit-out contribution or a rent-free period, record the conditions and how termination of the relationship would affect them.

Test your budget against the actual cost of occupation, not just the advertised rent. Then ask whether the project remains financeable if the premises need additional work. Do not rely on optimistic sales forecasts to cover a persistent shortfall in your premises budget.

5. Make commitments conditional on written approvals

Before paying non-refundable sums, negotiate a clear sequence of checks and approvals: inspection of the premises, acceptance by the franchisor, the landlord’s consent to works, and verification of the licensing process. A lawyer can draft appropriate conditions precedent or withdrawal rights, specifying the document that proves each condition has been met and what happens to payments if it has not.

If the franchisor requests the right to step into your position under the lease or transfer occupation to another operator, do not make a promise that conflicts with a prohibition on assignment or subletting in the landlord’s lease. This may require separate written consent or an agreement between the parties defining the scope and conditions of that right.

Practical takeaway: Do not sign the outlet’s lease in isolation from the franchise agreement. Prepare a single schedule of terms, approvals, works and costs, and resolve every conflict in writing before making a financial commitment.