Buying a Franchise in Lebanon: Protecting Your Contract with a Master Franchisee

You may buy a franchise in Lebanon from a local company that holds the rights to develop the brand, rather than directly from the brand owner. A convincing offer is not enough: the stability of your business may depend on another contract to which you are not a party. In franchising, this structure is known as master franchising. It calls for particular scrutiny before you pay any fees, especially to establish what happens to your outlet if the local company’s relationship with the original franchisor ends.

1. Understand Your Place in the Contractual Chain

A master franchisee receives rights from the original franchisor within a defined territory or scope. Those rights may include the right to grant sub-franchises. However, the right to operate outlets in its own name does not automatically include the right to enter into agreements with independent investors. Ask for written evidence that the local company has the authority to grant the franchise it is offering you.

Start by mapping a simple chain: the brand owner, the master franchisee, and the company that will operate your outlet. Beside each party, note its legal name, its role, who signs on its behalf, and what it undertakes to provide. If another company handles training or collects payments, add it to the map and identify the basis for its role.

Do not settle for the statement, ‘We are the authorised agent.’ Ask specifically: will the original franchisor sign any undertaking towards you? Will you have the right to demand support directly from it? Its logo on the proposal, or its attendance at an introductory meeting, is not enough on its own to establish a direct contractual relationship.

2. Check the Scope and Term of the Master Agreement

Ask to review the relevant provisions of the master agreement, even through a redacted copy that withholds unnecessary commercial information, or obtain direct confirmation of the local company’s authority from the original franchisor. Confidentiality should not become a reason to accept rights whose existence you cannot verify.

Focus on these points:

• Authority to grant sub-franchises: Does each transaction require prior approval? Has approval been given for your project?
• Remaining term: Does the master agreement cover the full proposed term of your contract?
• Scope of operations: Does it cover the type of outlet and the services you will actually provide?
• Conditions for retaining the rights: Does the local company have obligations whose breach could lead to termination of the master agreement?
• Status of sub-franchises: Does the agreement address what happens to them on expiry or termination?

If your contract would run beyond the remaining term of the master agreement, ask for a clear contractual explanation. A promise from the local company that it ‘will definitely renew’ is no substitute for an enforceable commitment. Also ask for up-to-date confirmation of whether there are any termination notices or unresolved material breaches, together with an undertaking to notify you of changes affecting your rights.

3. Distinguish Lebanese Law from Industry Commitments

Lebanon has no comprehensive law specifically governing franchise agreements, nor a specific statutory regime requiring a standardised franchise disclosure document. The relationship is governed primarily by the Code of Obligations and Contracts and general contract law, with commercial, intellectual property and other rules applying according to the obligations involved and how the business operates.

Whether Legislative Decree No. 34 of 1967 on commercial representation applies cannot be determined simply by calling a company an ‘agent’ or a ‘master franchisor’. This requires a Lebanese lawyer to assess the legal classification and substance of the relationship. You should not assume that every franchise automatically benefits from commercial representation protections.

The Lebanese Franchise Association has also adopted a code of ethics covering pre-contractual information and the substance of the relationship. It is not a law binding on all franchisors. Its scope covers the relationship between a master franchisee and a sub-franchisee, but not the relationship between the original franchisor and the master franchisee. Check whether the local company is a member, whether it has supplied you with the code, and how the code’s commitments relate to your contract. Membership is not a guarantee from the brand owner that your outlet will be able to continue operating.

4. Negotiate Continuity Before a Dispute Arises

The most important protection is a written arrangement setting out what happens to your outlet if the master agreement ends for reasons not attributable to you. You could propose a tripartite agreement signed by the original franchisor, the local company and your company, setting out the possibility of transferring your franchise relationship directly to the original franchisor or to a replacement master franchisee.

This arrangement should specify the transfer conditions, timeframe, fees and obligations that will continue. Ask whether continued operation depends on there being no material breach on your part, and who determines whether that condition has been met. Do not assume you have an automatic right to transfer, or that an undertaking from the local company alone can bind the original franchisor.

Address the transition period too: who will provide support, who will receive payments, and how will you avoid being asked to pay twice? If continued operation is not possible, specify in the contract how fees paid for services not delivered will be handled, and who will be responsible for unfulfilled obligations. These are negotiated rights that require clear drafting, not compensation automatically guaranteed when the master agreement ends.

5. Make Verification a Condition of Commitment

Before signing, gather evidence of the authority to grant the franchise, the necessary approvals, alignment of the contract terms, and arrangements for continuity or for dealing with an interruption. Have your lawyer review these together, rather than examining your sub-franchise agreement in isolation from the agreement on which it depends.

The practical takeaway: Do not buy an operating term that the local company cannot prove it has the right to grant. Make the provision of the necessary evidence and signatures a written condition that must be met before non-refundable fees become payable. Do not rely on a promise to complete the paperwork after you have paid.