Buying a Franchise in Lebanon: Payment Currencies and Transfer Risks

Two brands may appear to charge similar fees, but their payment arrangements can make one more expensive and risky than the other. Before entering the franchise market in Lebanon, do not simply ask how much the fee is: ask which currency it is calculated in, which currency it must be paid in, and when payment is deemed complete. This guide focuses on turning payment terms into clear obligations, rather than leaving them open to interpretation by the franchisor or bank when the first payment falls due.

1. Distinguish between the currency of account and the payment currency

The currency of account is the currency in which the debt is denominated, while the payment currency is the one you use to discharge that debt. They may be the same, or the agreement may allow payment in another currency using a conversion formula. The risk lies not in having different currencies, but in failing to establish a rule that both parties can apply and verify.

Ask for a separate payment schedule covering the initial franchise fee, ongoing fees and services paid for by the franchisee and provided by the franchisor. For each item, record the currency of account, the accepted payment currency, the due date, the beneficiary account and the evidence required to confirm payment. Do not assume that permission to pay the initial fee in an alternative currency also applies to subsequent payments.

If the outlet earns revenue in a different currency from the one in which its obligations are denominated, ask your accountant to test how changes in the cost of buying the payment currency would affect available cash. The aim is not to predict exchange rates, but to establish whether the outlet can meet its obligations when the required currency becomes more expensive or harder to obtain on time.

When comparing brands, compare the actual cost of meeting the payment terms, not just the headline fee. An offer with lower fees may involve higher transfer and currency purchase costs, or expose you to risks that are not apparent in the commercial proposal.

2. Set a verifiable exchange-rate mechanism within Lebanon’s legal framework

Lebanon has no comprehensive franchise-specific law, nor a general statutory regime requiring a franchise-specific pre-sale disclosure document or national registration of franchise agreements. The relationship is governed primarily by the Code of Obligations and Contracts, with the Commercial Code and relevant monetary, banking and tax provisions applying according to the transaction. Do not therefore assume that a payment clause in an overseas template is automatically enforceable locally.

Ask a lawyer in Lebanon to review the legality of the wording of any foreign-currency obligation and how it may be discharged under the rules in force. An agreement between the parties does not override mandatory rules, and choosing foreign law does not, on its own, settle every issue relating to payment in Lebanon.

If the agreement permits conversion between two currencies, it should specify:

• The exchange-rate source to be used, rather than simply referring to the ‘prevailing rate’.
• The reference date and time for calculating the rate.
• What happens on bank holidays or if the chosen rate is no longer published.
• Who bears conversion charges and the exchange-rate spread on currency purchases.
• How discrepancies or invoice errors will be corrected.

Avoid giving the franchisor unrestricted power to set the rate later. Propose an agreed alternative source if the primary source becomes unavailable. These are negotiated safeguards that need to be expressly included, not rights automatically granted by franchise-specific legislation.

3. Define when payment is complete and who bears the charges

There is a practical difference between the date a transfer instruction is issued, the date the money is debited and the date it reaches the beneficiary’s account. If the agreement treats payment as complete only on receipt, you may bear the consequences of delays outside your control, even if you submitted the instruction on time. If notification alone is enough, a dispute may arise when a transfer is rejected or returned.

Ask for wording that defines the event establishing payment and the supporting document required, while addressing documented banking delays. You can negotiate a period to resolve administrative problems before a contractual penalty applies, provided you can show that a valid instruction was issued and sufficient funds were available. Do not assume that a transfer receipt alone discharges your obligation without checking the agreement and the law.

Also distinguish between charges imposed by the sending bank, intermediary banks and the receiving bank. A clause stating that ‘all charges are payable by the franchisee’ may leave the final cost unclear. Ask your bank for a breakdown of expected charges, and specify in the agreement how any payment shortfall will be settled, rather than immediately treating it as a breach that puts the agreement at risk.

To help prevent fraud, agree a procedure for changing bank details: notification from a known authorised representative, followed by independent verification through a previously approved contact channel. Do not act on a request to change the account simply because it arrives in an apparently official email.

4. Agree a lawful alternative if a transfer cannot be made

Work through a practical scenario with the franchisor: the funds are available, but the bank cannot use the specified transfer route. Is there an alternative account in the name of the party entitled to payment? Can the deadline be extended, or another agreed payment method used? Put the answers in writing before payment falls due, not during a dispute.

Any alternative must remain compliant with banking, tax and beneficiary-verification requirements. Do not transfer funds to a personal or third-party account without legal review and documentation confirming that the payment will count towards discharging your obligation. Specify who can approve the alternative, how long they have to respond and which document will confirm acceptance of the payment.

Before signing, bring together the currency schedule, exchange-rate formula, allocation of charges, account-change procedure and alternative transfer plan in a clear payment annex.

Practical takeaway: Do not accept a foreign-currency obligation until you understand the cost of obtaining that currency, the payment route and the consequences of a failed or delayed transfer. Review the annex with a lawyer, an accountant and your bank, then make sure it is consistent with the rest of the agreement.