Buying a Franchise in Lebanon: Managing Pricing and Mandatory Discounts

The brand may look right and the proposed purchase price may seem reasonable, but your outlet’s profitability also depends on a less obvious question: who decides the selling price? Across a franchise network, shared campaigns help create a consistent customer experience, but they can also oblige franchisees to offer discounts that do not suit their cost base. Before buying a franchise in Lebanon, distinguish between the right to use the brand and the right to make pricing decisions, and establish in writing who bears the cost of each promotion.

1. Establish who actually controls pricing

Start by requesting the pricing policy, not just the price list. The list tells you what customers pay today; the policy determines who can change prices tomorrow. Review the franchise agreement, its schedules and campaign guidelines together, looking for any provision that allows the franchisor to impose promotions or change prices without your consent.

Ask for written answers to specific questions:

• Are suggested prices recommendations, or must you follow them?
• Can you adjust a product’s price to reflect differences in your outlet’s operating costs?
• Who approves local discounts, and within what timeframe?
• Do the same prices apply to in-store sales and takeaway or delivery orders?
• Can a promotion covering your outlet be launched before you are told its terms?

Watch for differences between the wording and actual practice. The agreement may describe prices as recommended, while the IT system prevents changes or requires approval that does not arrive in time. Ask for a practical demonstration of how prices are updated, and identify who is authorised to make changes. Do not assume that the technical ability to change a price gives you a contractual right to do so, or vice versa.

2. Test the cost of a promotion per order

It is not enough for the franchisor to say that discounts increase sales. You need to know what your outlet retains after fulfilling a discounted order. Request actual terms from previous campaigns, including the products covered, the promotion’s duration and how any franchisor contribution is calculated. Then apply those terms to your outlet’s projected costs.

Calculate the amount your outlet receives after the discount, then deduct the cost of the product, packaging, sales-channel commission and any additional direct costs. Also check the basis for calculating royalties: are they charged on the amount actually collected or on the sale value before the discount? Do not assume that the phrase ‘net sales’ settles the issue unless the agreement clearly defines it.

Pay particular attention to multi-part offers: a free product with an order, a discount across an entire basket, or loyalty points redeemed later. Your outlet may bear the cost of a benefit that the customer earned at another outlet. Ask who will reimburse you, what documentation is required and when settlement will take place.

Also test whether discounts can be combined. A brand promotion might be used alongside a delivery-app voucher and a loyalty benefit, completely changing the economics of the order. The agreement should explain which offers can be combined, who pays for each element and who can stop unintended combinations. Then compare each order’s contribution towards fixed costs, rather than looking at sales revenue alone.

3. Negotiate rules for participation and reimbursement

The aim is not to reject every campaign, but to avoid an open-ended financial commitment. Request a written process that applies before a promotion launches, specifying the final price, duration, participating channels and each party’s share of the discount. If participation is compulsory, discuss limits on your commitment and conditions for exemptions rather than relying on a verbal promise to take your circumstances into account.

Negotiations can cover the following safeguards:

• Advance notice that allows you to adjust stock levels and staff schedules.
• Separate approval for extending a campaign or expanding its scope.
• A clear procedure for requesting an exemption where local costs are documented.
• Details of how the franchisor’s support will be paid, including whether it will be transferred as cash or offset against fees due.
• A settlement report that allows you to reconcile eligible sales with reimbursement.

If support depends on submitting data or invoices, make sure you can extract the required information and that submission deadlines are clear. Ask for a process to challenge rejected amounts, without every accounting discrepancy automatically being treated as a breach of contract. These are rights to negotiate and record in the agreement, not benefits automatically guaranteed by buying a franchise.

4. Check the legal limits before adopting the policy

Lebanon has no comprehensive franchise-specific law, nor a dedicated national regime requiring franchise registration or a mandatory disclosure document comparable to those used in some countries. The relationship is governed by the Code of Obligations and Contracts and general commercial rules, with other relevant legislation applying according to the nature of the business and the relationship.

Pricing arrangements must also take account of Consumer Protection Law No. 659/2005, particularly its provisions on price information, advertising and promotions. Obtain a legal review of how prices are displayed and the conditions for claiming discounts, so that the franchisor does not advertise an offer your outlet cannot honour on the published terms. Pricing restrictions should also be assessed under applicable competition rules: including a clause in the agreement does not, by itself, establish that it is lawful.

The commercial representation provisions in Legislative Decree No. 34/1967, as amended, may also be relevant depending on the legal classification of the relationship, but they do not automatically give every franchisee the same protection. Ask a Lebanese lawyer to review the policy and agreement together, and do not rely on a foreign template without adapting it to local requirements.

Practical takeaway: Before signing, prepare a summary identifying who controls pricing, the cost of each type of discount, and the procedures for reimbursement and exemptions. If a mandatory promotion cannot be linked to a clear calculation and a written allocation of responsibility, do not treat its financial impact as settled.