Buying a Franchise in Lebanon: Managing Exit and De-branding Costs

When buying a franchise in Lebanon, it is easy to focus on opening day and overlook the day you may have to stop using the brand. Yet joining a franchise network creates obligations that may continue after the agreement ends, even if the outlet has been successful throughout its term. Before paying any fees, examine the cost of leaving: what must you remove, what can you sell, who pays, and when are the accounts settled?

1. Separate the end of the franchise from the end of your business obligations

Lebanon has no single franchise-specific law, nor a dedicated statutory regime requiring a pre-contractual disclosure document or separate national registration of franchise agreements. The relationship is governed primarily by the Code of Obligations and Contracts, alongside the Commercial Code, intellectual property rules and other general provisions, depending on the issue. This does not remove the need for the usual commercial and tax registrations.

Legislative Decree No. 34 of 1967 on commercial representation, as amended, may also be relevant, depending on the nature of the relationship and its legal classification. Do not assume that its protections automatically apply to every franchise. Ask a Lebanese lawyer to assess the actual agreement, particularly how its classification affects termination and compensation.

Start by distinguishing between three situations: expiry without renewal, early termination for breach, and exit by mutual agreement. Ask for the effects of each on fees, stock and equipment to be set out. An agreement that groups them all under ‘when the relationship ends’ may leave you facing the same costs regardless of why you leave.

Likewise, the end of the brand licence does not automatically end your lease, loan, employment contracts or supplier agreements. List these contracts and have the remaining liabilities assessed separately, rather than assuming that closing the outlet stops all expenses.

2. Turn de-branding into a clear, workable plan

The phrase ‘remove all branding immediately’ may sound clear, but it can cover much more than the external sign: bespoke décor, staff uniforms, packaging, price lists, digital accounts and location listings. Ask for a schedule identifying what must be removed, handed over or destroyed, distinguishing between the franchisor’s property and your company’s property.

Agree a realistic deadline and a way to demonstrate completion. You could propose dated photographs, a handover record and a final inspection, specifying who approves the work and when they must respond. If removing the shopfront requires coordination with the landlord or a contractor, allow for this in the timetable, without treating it as open-ended permission to use the brand after the licence expires.

Pay particular attention to clauses allowing the franchisor to enter the premises and remove fixtures or equipment at your expense. Ask for clear rules on notice, authorised personnel, the scope of work, inventory records and liability for damage, and obtain legal advice on enforceability. Do not let a requirement to ‘reinstate the premises’ become an uncapped bill determined by one party alone.

Also distinguish between ending access to the franchisor’s systems and retaining the records you need to meet your legal and accounting obligations. Ask for an orderly transition, rather than an abrupt cut-off that prevents you from preparing the final accounts.

3. Agree what happens to stock and equipment before buying them

When you leave, you may still hold branded stock, equipment unsuitable for another business and packaging that is difficult to sell. Do not assume the franchisor must buy these back simply because it specified them. If you want a buy-back right, make it a clear contractual obligation, not a promise of help later.

Ask for written answers to the following:

• Which items qualify for buy-back, and what requirements apply to their condition and remaining shelf life?
• How is the price calculated, and what deductions are permitted?
• Who pays for stocktaking, transport, storage and, where necessary, destruction?
• When does responsibility for the goods transfer, and when is payment due?
• Is a sell-off period allowed, and on what terms may the brand be used during it?

Separate stock you own from goods held on consignment and leased equipment. Do not count the proceeds from selling an asset that is pledged as security or subject to restrictions on disposal as available cash without checking the relevant terms.

Test a conservative exit scenario in which the franchisor buys nothing back. Obtain an independent estimate of the equipment’s second-hand value, then deduct the costs of dismantling it, transporting it and making good the premises. This exercise reveals the difference between the purchase cost and the value you can actually recover on exit.

4. Tie the final settlement to documents and deadlines

Ask for a settlement timetable specifying when royalties and contributions stop accruing, how refunds issued after exit for earlier sales will be treated, and how unpaid invoices will be handled. If fees continue during an agreed sell-off period, their basis and duration should be expressly defined, rather than left open until the franchisor declares the matter closed.

Also agree how retained funds and guarantees will be dealt with: when must the franchisor provide a statement of claims, what supporting documents are required, how can you dispute a claim, and when must any balance be returned or the steps to release a guarantee be completed? Avoid signing a full and final release before understanding its effect on your rights and any unresolved claims.

Finally, include exit costs in your investment appraisal from the outset: de-branding, dealing with stock and settling obligations under separate contracts. The practical takeaway: before signing, obtain an exit schedule setting out the work required, responsibilities, deadlines and calculation methods. An orderly exit starts before opening day.