Buying a Franchise in Lebanon: How Can You Protect Your Exclusive Territory?

You may choose a successful brand and a suitable location, only to discover that another branch or the brand’s online shop is targeting the same customers. When entering Lebanon’s franchise market, the promise of an ‘exclusive territory’ is not enough to protect your investment. You need to define what exclusivity covers, who is bound by it and how it applies to in-store sales, delivery and online sales. This guide will help you turn that promise into terms you can assess and negotiate.

1. Distinguish between location exclusivity and market protection

Start with a clear question: what am I actually buying? The agreement may give you the right to operate a shop at a specific address without preventing another shop from opening nearby. Or it may prohibit the award of a new franchise within a defined area while allowing the franchisor to open a directly owned branch there. These are different arrangements, even if both are described verbally as exclusive.

Ask for protection to be defined at three levels:

• Location: Where may you establish an outlet, and where is the franchisor prohibited from establishing competing outlets?
• Parties: Does the restriction cover the franchisor, its affiliated companies and other franchisees?
• Activities: Does it cover shops, kiosks, delivery-only kitchens and temporary outlets?

Do not assume that protection for one brand prevents the franchisor from operating another business concept nearby. Ask about related brands and alternative concepts, and request disclosure of planned projects that could affect your location. The aim is not to guarantee an absence of competition, but to understand what competition could come from within the network itself.

2. Draw boundaries that work on the ground

Phrases such as ‘Beirut and its suburbs’ or ‘the area surrounding the branch’ leave room for disagreement. Attach a clear map to the agreement and define the boundaries using streets, coordinates or a clearly identified administrative area. If you use a radius, specify the point from which it is measured and whether distance is calculated in a straight line or by road.

Assess the territory on the ground before accepting it. It may look extensive on a map but be difficult to travel across, or most demand may be concentrated in a shopping centre excluded from protection. Request a written list of exclusions, including airports, hotels, universities and shopping centres, if the brand reserves the right to operate there.

Then compare the scope of protection with the shop’s financial assumptions. If sales forecasts depend on employees at a nearby complex, but the franchisor can open an outlet inside it, reassess the business’s viability. Do not pay extra for exclusivity before understanding its actual value. Nor should you treat a priority right to open a second branch as equivalent to preventing others from opening one: each has a different effect.

3. Set explicit rules for delivery and online sales

Boundaries on a map do not automatically govern app orders. A branch outside your territory may receive orders from customers within it, or the brand may sell directly through its website. Distinguish between the outlet’s location, the customer’s address and the location where the order is fulfilled, and specify which determines how sales are allocated between branches.

Discuss specific operational questions with the franchisor:

• Who receives an online order when the delivery address is within your territory?
• May a neighbouring branch target residents in your territory with paid advertising?
• How are orders from companies with multiple premises allocated?
• Who bears the discount, app commission and delivery cost when an order is transferred between branches?
• Will you receive reports that allow you to check whether the agreed rules are being followed?

You could agree to route orders according to the delivery address, or to receive specified compensation for certain sales the franchisor fulfils within your territory. These are options to negotiate, not automatic rights. Test the rule with a written example: a customer within your territory orders through the central app, but the nearest branch is outside it. Who fulfils the order, who records the revenue and how is the royalty calculated?

4. Understand the legal basis for exclusivity in Lebanon

Lebanon has no comprehensive law specifically governing franchise agreements. The relationship is primarily governed by the Code of Obligations and Contracts and the Commercial Code, alongside other relevant rules, including those on consumer protection, intellectual property and competition. Exclusivity therefore requires precise contractual drafting and legal review; it is not a standard form of protection conferred simply by the ‘franchise’ label.

It is also important to distinguish franchising from commercial representation governed by Legislative Decree No. 34 of 1967. Beirut Court of Appeal Decision No. 1106/2009, issued on 30 July 2009, distinguished a franchise agreement from commercial representation. However, the legal classification of a relationship depends on its substance. You should not assume that commercial representation rules apply, or that they are excluded, merely because of the agreement’s title.

Ask a Lebanese lawyer to assess the nature of the agreement and the lawfulness of its geographical and online restrictions under the rules in force, particularly Competition Law No. 281 of 2022. Equally, do not treat a choice of foreign governing law as a guaranteed way to bypass mandatory Lebanese provisions.

5. Link protection to clear criteria and a procedure for resolving breaches

The franchisor may make continued exclusivity conditional on achieving certain sales targets or opening additional outlets. Negotiate measurable targets and specify the data source, assessment period and procedure for challenging an assessment. Avoid a clause that allows the territory to be reduced simply because performance is ‘unsatisfactory’, without a defined benchmark.

Request written notice of any breach and a period in which to remedy it before protection is withdrawn. In return, specify what happens if the franchisor or another branch encroaches on your territory: who receives the complaint, what documents are required, the deadline for a response, and the procedure for stopping the encroachment and settling its financial impact. Make any change to the territory subject to a written procedure, rather than a unilateral update to the operations manual.

The practical takeaway: Before signing, obtain a signed map, a schedule of exclusions, rules for allocating online orders and a procedure for resolving territorial overlap. Useful exclusivity is not about securing the largest area on offer, but about obtaining clear protection that you can measure and enforce.