Buying a Franchise in Lebanon: Disclosure Before Paying a Deposit

Your journey into franchising may begin with an attractive offer, followed by a request for payment to reserve a territory or start a site assessment. But the most important step comes before you transfer any money: obtaining a written information pack that allows you to understand what you are actually buying. This guide focuses on compiling a pre-contract disclosure pack in Lebanon, turning marketing promises into a clear basis for an investment decision.

1. Understand what the law requires and what you need to negotiate

Lebanon has no specific law governing franchise agreements, nor a dedicated statutory regime requiring a standard disclosure document or a set waiting period for these agreements. Depending on its subject matter, the relationship is governed by the Code of Obligations and Contracts and the Commercial Code, as well as rules on trade marks, intellectual property and unfair competition. Consumer protection laws must also be observed when dealing with customers.

The Lebanese Franchise Association has adopted a code of ethics that provides for prospective franchisees to receive complete and accurate written information about the essential elements of the relationship, together with a copy of the code, a reasonable time before making a commitment. However, this is not a general disclosure law binding on every franchisor. Check whether the franchisor is a member and the extent of its commitment to the code, and ask for a disclosure obligation to be included in the negotiation documents. The code also distinguishes between granting a franchise for an operating unit and granting a master franchise, so do not assume it applies in the same way to every relationship.

Do not assume, either, that you automatically benefit from the protections afforded to commercial representatives under Legislative Decree No. 34 of 1967. Beirut Court of Appeal Decision No. 1106/2009 distinguished franchising from commercial representation, but the legal classification depends on the substance of the relationship. Seek a review by a Lebanese lawyer, particularly if the offer is closer to exclusive distribution than to the transfer of operational know-how and ongoing support.

2. Request documents establishing the franchisor’s identity and authority

Send a written request for information before signing a reservation agreement, not just before the final contract. A balanced confidentiality undertaking can protect sensitive information, but it should not amount to an advance commitment to buy or a waiver of your right to raise objections.

The first part of the pack should include:

• The contracting party’s identity: its legal name, registration documents, the capacity in which the authorised signatory is acting, and the entity that will receive payments.
• The basis for using the trade mark: documents establishing ownership or licensing rights, its protection status in Lebanon, and any material restrictions on granting rights to use it.
• The local franchisor’s authority: if it is a master franchisee, request evidence of its right to grant sub-franchises in Lebanon and how long that right remains in force.
• Continuity of the relationship: a written explanation of what happens to your agreement if the relationship between the brand owner and the local franchisor ends.

You do not need access to every confidential detail of the agreements between these parties, but reliable documents or extracts should be provided to allow proper verification. A well-known brand name on an offer does not, by itself, prove that the company asking for your money has the right to grant the franchise.

3. Turn the financial and operational offer into information you can check

Request a consolidated schedule of all payments required, showing the recipient, invoicing and payment currencies, due dates, potential taxes and whether each amount is refundable. Distinguish between the initial franchise fee, equipment deposits, training costs, marketing fees and recurring charges. Ask how each charge is calculated and how discounts, returns and delivery-platform fees are treated.

If the franchisor provides sales or profit forecasts, ask for their sources and assumptions. Are they based on an operating outlet’s results or a hypothetical model? Do they include rent, wages, energy, maintenance and wastage? Do they reflect a location and operating conditions comparable to those of your proposed business in Lebanon? Do not treat figures in the offer as a profit guarantee, or use them as the basis for a financing commitment before having them reviewed by an independent accountant.

Operational disclosure should explain the training, opening assistance and ongoing support provided, mandatory suppliers, the process for changing prices, and requirements to renew equipment and fittings. Also request a list of outlets operating, closed or transferred during an agreed period, and the opportunity to contact current and former franchisees with their consent. The aim is to test the real experience, rather than rely on a selected success story.

4. Link disclosure to the deposit terms and the contract

A request for a deposit before information is supplied is not conclusive evidence of bad faith, but it does call for written clarification. Request an agreement specifying the payment’s purpose: does it reserve a territory, cover an assessment, or count towards the initial franchise fee? Then establish the circumstances in which it can be refunded, any possible deductions, the documents required to substantiate expenses, and the deadline for repayment.

Negotiate a review period that starts once the pack is complete, and terms preventing the payment from becoming a non-refundable fee until specified conditions have been met, such as verifying the franchisor’s authority and reviewing the contract. This is a suggested contractual safeguard, not a statutory waiting period for franchises in Lebanon.

Finally, compare the disclosure pack with the contract and its schedules. If the offer promises territorial protection or particular training, these must be specified in the contract, along with any exceptions. Pay attention to clauses stating that the contract alone constitutes the entire agreement, or disclaiming reliance on earlier statements. Discuss their effect with your lawyer, and ask for material promises to be recorded and any inconsistencies corrected before signing.

The practical takeaway: do not pay for a vague promise. Compile a dated pack, keep a record of questions and answers, and distinguish between verified information, forecasts and contractual commitments. If the franchisor’s identity, trade mark rights or deposit refund terms remain unclear, postpone payment until they have been clarified in writing.