Buying a Franchise in Lebanon: Protecting Your Contract When the Franchisor’s Company Is Sold

When buying a franchise in Lebanon, you may choose a brand because of its founder’s experience or the quality of its team. But what happens if the franchisor sells its company or transfers the network’s contracts to another business? In franchising, keeping the same name above the door does not guarantee that the same commitments will be honoured. Before signing, examine the provisions on contract transfers and changes of control, and identify the protections you need if the business you rely on to run your outlet changes.

1. Distinguish between a share sale and a contract transfer

Not every sale changes the party to your contract. If the franchisor’s shareholders sell their shares, the company itself may remain party to your agreement, even though its owners or those controlling its decisions have changed. If the franchise agreement is transferred to another company, however, the issue is the identity of the business that will collect your fees and fulfil the franchisor’s obligations.

There is also a third possibility: the brand or certain operating assets are sold, while your contract remains with the original company. In this case, ask whether that company retains the right to authorise your use of the brand and whether it can still provide the agreed services. Do not assume that selling an asset automatically transfers all the obligations associated with it.

Ask your lawyer to review the provisions covering:

• Assignment of the contract or rights arising under it.
• Transfer of obligations to another party.
• Direct or indirect changes of control of the franchisor.
• Mergers, restructuring and transfers to an affiliated company.

What matters is the effect of the transaction, not just its name. An exception for transfers within a corporate group, for example, could allow your contract to be placed with a less well-resourced company, even if ultimate ownership remains unchanged.

2. Understand the legal protections and their limits in Lebanon

Lebanon has no comprehensive franchise-specific law, dedicated national registration system for franchise agreements or mandatory franchise disclosure document of the kind required in some countries. The relationship is governed primarily by the Code of Obligations and Contracts, with provisions of the Commercial Code, intellectual property rules and other laws applying according to the issue concerned.

Do not therefore assume that franchisees have an automatic, specific right to object to a sale of the franchisor’s shares, or to end the relationship and recover fees simply because a sale has taken place. The consequences depend on the nature of the transaction, the wording of the contract and the applicable legal rules. Nor is transferring rights necessarily the same as transferring obligations or releasing the original party from them.

The substance of the relationship may also require an assessment of whether the commercial representation rules in Legislative Decree No. 34/1967, as amended, apply. These protections do not automatically extend to every agreement labelled a franchise. Seek local legal advice on the legislation in force and the legal classification of your particular agreement.

The Lebanese Franchise Association’s Code of Ethics calls for written disclosure of material information a reasonable time before a commitment is made. However, it is not a generally applicable law, nor does it replace a clear contractual clause governing notification of subsequent changes during the relationship.

3. Check the transfer provisions before paying fees

Start with the draft agreement and look for any broad advance consent allowing the franchisor to transfer the relationship ‘to any person’ without conditions. Ask whether that consent covers only the transfer of rights to collect payments, or operational obligations as well. Does it immediately release the original company from liability?

Also request a written statement about any announced sale or restructuring that could affect performance of your agreement. There may be legitimate restrictions on disclosing confidential negotiations, so do not treat a lack of detail about a potential transaction as conclusive evidence of a problem. Focus on obtaining accurate representations about facts the franchisor can confirm.

With your adviser, draw up a simple map of the key entities: who owns the brand, who provides support, who operates the systems and who receives the fees? If these are different businesses, check that a change in ownership of one will not leave your franchise without an essential service. Ask for an explanation of any discrepancy between this map and the promises made in the draft agreement.

4. Negotiate terms you can verify

Rather than simply seeking an outright ban on a sale, discuss conditions that protect continuity without assuming you have the right to control the franchisor’s business decisions. You could propose advance notice wherever legally possible, followed by notice within a specified period after completion where disclosure beforehand is not possible.

If the contract is transferred, request a written undertaking from the new entity to fulfil the franchisor’s obligations, together with evidence of its right to authorise use of the brand and its ability to provide the agreed services. Also discuss ensuring that the original franchisor is not automatically released from existing obligations, and clarify how the transfer would affect any parent company guarantee.

Include clear transition arrangements: a responsible contact person, continuity of training and systems, and a process for verifying new payment instructions. Do not treat a change of bank account alone as sufficient evidence that the contract has been transferred.

Finally, agree how any breach arising from the transfer will be addressed: notice, an appropriate period to remedy the breach, and specific rights if an essential service stops or the brand can no longer be used. Link any negotiated termination or settlement rights to facts that can be demonstrated, and specify what happens to fees already paid without assuming that a refund is automatically guaranteed.

The practical takeaway: Before signing, test your agreement with one question: if the franchisor’s ownership changes tomorrow, who remains responsible for each promise? Do not pay on the assumption that the same people will stay in place; require written commitments that survive their departure.