Buying a Franchise in Lebanon: Defining Exclusivity and Your Branch Territory

The phrase ‘exclusive territory’ may seem reason enough to choose one brand over another, but it does not, on its own, explain what you are actually buying. A franchisor may be barred from opening a neighbouring branch while remaining free to sell through its app or concessions within other shops. Before joining Lebanon’s franchise market, turn the promise of exclusivity into a clearly defined territory, understandable exceptions and an enforceable process for dealing with encroachment.

1. Define the rights exclusivity actually gives you

Start by asking: are you receiving the exclusive right to operate the brand within a territory, or simply a promise that no similar branch will open nearby? Does that promise bind only the franchisor, or does it also cover its associated companies and other franchisees? Do not confuse ‘territorial exclusivity’ with a ‘priority right’ to open a new branch. Priority may give you an opportunity to submit an offer without preventing the site from subsequently being awarded to someone else.

Ask for a map attached to the agreement, together with a written description of the territory’s boundaries. Neighbourhood names alone can leave room for disagreement, particularly where commonly used names differ from administrative boundaries. If the territory is defined by a distance from the premises, specify whether that distance is measured in a straight line or along roads, and which reference source will be used to resolve discrepancies.

The schedule should ideally answer the following questions:

• Does protection apply to the branch address or the whole mapped territory?
• Does it cover all the brand’s formats, or only the outlet format specified in the agreement?
• Will the boundaries remain unchanged if the branch relocates with the franchisor’s approval?
• Are any existing branches or previously granted rights excluded, and exactly where are they located?

Also request a list of approved sites that have not yet opened. A branch that is not visible today may already be subject to an earlier commitment, so it should be disclosed and its status addressed before you pay for exclusivity.

2. Separate site protection from other sales channels

Assess exclusivity channel by channel, rather than relying solely on a ban on ‘another branch’. Exceptions may include online sales, delivery, kiosks, pop-up outlets, sales to organisations or product sales through independent shops. These exceptions are not necessarily unacceptable, but their effect on your revenue should be clear.

Prepare a table showing, for each channel, who may sell, who fulfils the order, how revenue is allocated and who is responsible for customer service. For deliveries, distinguish between the customer’s location and the location of the branch preparing the order. Geographical exclusivity for your premises does not automatically settle whether another branch can deliver into the same territory.

For example, if a customer within your territory orders through the brand’s app, is the order routed to you, to the nearest branch or to a dedicated kitchen? If you receive a payment for that order, how is it calculated and how can you verify it? These are arrangements to negotiate, not rights you can assume simply because the word ‘exclusive’ appears in the agreement.

Ask for exceptions to be confined to a clear list, with a defined procedure for adding new channels. Avoid wording that allows the franchisor to introduce any future channel without notice or without addressing its effect on the protection you have paid for.

3. Understand Lebanon’s legal framework and the limits of protection

Lebanon has no comprehensive franchise-specific law, nor a general statutory regime requiring a franchise disclosure document before a sale or a dedicated national registration system for franchise agreements. The relationship is governed primarily by the Code of Obligations and Contracts, alongside the Commercial Code and other relevant general rules, depending on the nature of the business and the dealings involved.

Do not therefore assume that franchisees automatically enjoy exclusivity under the law. The scope of protection depends on the agreement’s terms, the legal classification of the relationship and the mandatory rules that apply. Ask a Lebanese lawyer to review the exclusivity provisions against current competition rules, particularly if they restrict customers or sales channels rather than just branch locations.

A relationship involving commercial representation or exclusive distribution also needs a separate assessment to determine whether Legislative Decree No. 34 of 1967 on commercial representation, as amended, may apply. Exclusivity in a franchise agreement is not, by itself, enough to establish that this regime or its protections apply. What matters is the actual nature and terms of the relationship.

You should also distinguish between legislation and industry codes of conduct. The Lebanese Franchise Association’s Code of Ethics includes disclosure obligations within its scope, but it is not a national disclosure law. Check whether the franchisor is a member and which obligations apply to it. Do not treat the code as a substitute for a contractual schedule defining your territory and its exceptions.

4. Set clear terms for losing exclusivity and addressing encroachment

The franchisor may make continued exclusivity conditional on minimum sales or a specified service standard. Ask for a clear definition of the performance measure, the assessment period, the data source and whether returns and online orders are included in the calculation. Also discuss how sales made by the franchisor within your territory will affect the assessment of your performance.

Do not accept that any shortfall should automatically result in permanent loss of exclusivity. Negotiate written notice, a reasonable opportunity to remedy the problem and a clear sequence of consequences, together with conditions for restoring protection. Specify whether losing exclusivity changes the fees or allows you to reassess your commitment.

Equally, address encroachment by the franchisor or another branch: how do you raise an objection, what supporting documents are required, who investigates it, and what deadlines apply for a response and corrective action? Discuss suitable remedies with your lawyer. Do not assume that compensation or an order stopping the offending activity will follow automatically.

The practical takeaway: Do not pay for the word ‘exclusive’. Ask for a map, a table of channels and exceptions, and clear terms governing continued protection and remedies for breaches. Then assess the branch’s viability against those actual limits.