Buying a Franchise in Lebanon: Managing Multi-Unit Opening Commitments

A brand may offer you the rights to open several franchise outlets in Lebanon rather than start with just one. The offer can look attractive when it includes priority expansion rights, but it may turn an opportunity to join a franchise network into a financial commitment that exceeds your operational capacity. Before signing, establish whether you are buying an option to grow or committing to a binding opening programme, and what you stand to lose if you cannot deliver it.

1. Distinguish between expansion rights and opening obligations

Start by requesting all the documents governing future outlets, not just the agreement for the first one. Obligations may be spread across a development agreement, an opening schedule and separate outlet agreements. Read these documents together to establish whether the franchisor’s approval of each subsequent outlet is guaranteed subject to clear conditions or left to its discretion.

There is a practical difference between being given the option to open an additional outlet within a specified period and being required to open a set number by fixed dates. In the latter case, failing to open may constitute a breach of contract even if the first outlet is performing well. Do not rely on the offer being described as an ‘expansion opportunity’; look for words such as ‘undertakes’ and ‘must’, and the consequences attached to them.

Ask for written answers to the following questions:

• Can you stop at the first outlet, and what would that cost?
• Does each outlet require a new agreement, and on what terms and at what fees?
• Does the plan cover only outlets you operate yourself, or does it allow you to grant franchises to others?
• Will the financial terms for future outlets remain fixed, or will the franchisor’s terms in force when they open apply?

Do not assume that buying development rights automatically gives you the right to sub-franchise. That is a separate entitlement which the agreement must expressly provide for.

2. Turn the opening schedule into a financeable plan

Do not accept a schedule based solely on elapsed months. Link each stage to verifiable requirements: site selection, franchisor approval, funding availability, completion of the necessary licensing procedures and preparation of the management team. Define what counts as ‘opening’: a trial run, opening to the public or formal approval of the outlet by the franchisor?

Prepare a separate budget for each outlet, followed by a consolidated budget showing where expenditure overlaps. You may start paying for the second outlet’s fit-out while the first still needs cash support. Include development fees, fees for each outlet, deposits, fit-out costs, pre-opening expenses and working capital needed for launch, without counting the same amount twice.

Check specifically how development fees are treated. Are they credited against fees for subsequent outlets? Is that credit conditional on opening by a particular date? What happens to the unused portion if the plan is scaled back? Request a schedule showing when each payment falls due and what it covers. Do not accept the phrase ‘non-refundable fees’ without understanding its scope.

Test a scenario in which the first outlet takes longer than expected to stabilise and cannot fund the next one. If the plan falls apart under that scenario, negotiate smaller phases or an expansion option rather than a comprehensive commitment from the outset.

3. Separate expansion defaults from the protection of operating outlets

One of the most dangerous provisions in multi-unit agreements is a clause allowing a breach relating to one outlet to trigger termination of all agreements. Failure to open a future outlet could put an existing outlet at risk even though it is meeting its obligations and paying what it owes. Ask your lawyer to trace the cross-references between agreements to identify this effect, rather than reading each termination clause in isolation.

Negotiate graduated, clearly defined consequences for failing to carry out the expansion plan. Possible arrangements include revising the schedule by written agreement, reducing the number of remaining outlets or allowing unused development rights to lapse, while keeping the agreements for compliant operating outlets in place. These are negotiated arrangements, not automatic statutory rights.

Balance the obligations too. If the franchisor requires an outlet to open by a particular date, the agreement should set a deadline for responding to requests for site and layout approval. Ask for the scheduling mechanism to address delays caused by the franchisor’s failure to complete a requirement for which it is responsible, with a clear method for documenting requests and responses.

Pay attention to renewal: do not allow renewal of a successful outlet’s agreement to depend automatically on completing the entire expansion plan. Also specify how closing an outlet by mutual agreement affects the required total, so that an unexpected obligation to open a replacement does not arise.

4. Secure protection within Lebanon’s legal framework

Lebanon has no specific law governing franchise agreements or dedicated statutory franchise disclosure regime. The relationship is governed primarily by the Code of Obligations and Contracts and the principle of freedom of contract, with the Commercial Code and other relevant general rules applying according to the nature of the activity and obligations. Do not therefore assume that you have a specific statutory right to reduce the number of outlets or recover development fees simply because your plans have changed.

The Lebanese Franchise Association has adopted a code of ethics that provides for written disclosure a reasonable time before contracting and sets requirements for the content of agreements. However, it is not a generally applicable law binding every franchisor. Check whether the other party is a member, whether it is committed to the code and how that commitment is reflected in your documents.

Legislative Decree No. 34 of 1967 on commercial representation may also be relevant, depending on the legal characterisation of the relationship. Do not assume that its protections are guaranteed merely because you hold exclusive rights. Obtain a specialist Lebanese legal review of the full set of agreements before committing.

Practical takeaway: Do not buy rights to more outlets than you can finance and manage. Sign only once you have secured a realistic schedule, clarified how every fee will be treated and protected operating outlets if the expansion plan runs into difficulty.