Buying a Franchise in Lebanon: Reviewing the Marketing Fund Before You Sign

A marketing contribution may look like a minor cost when buying a franchise in Lebanon, but it can become an ongoing expense with no clear benefit to your outlet. Joining a franchise network gives you the opportunity to benefit from the brand’s collective presence, but it does not automatically guarantee fair or verifiable spending. Assess the marketing fund as a commitment in its own right: who manages it, where does the money go, and what information are you entitled to receive?

1. Understand what your marketing contribution buys

Start by asking for a written definition of the fund. It may be a separate account holding franchisees’ contributions, or simply an accounting entry in the franchisor’s books. Do not assume that the word ‘fund’ means the money is held separately or subject to independent oversight. Ask how it is held and accounted for, and who authorises spending.

Next, distinguish between three commitments that may appear in the offer: contributions to brand-wide campaigns, a minimum amount you must spend on local advertising yourself, and an opening campaign budget. Ask whether these obligations are cumulative and whether local spending counts towards the general contribution. Otherwise, you may budget for one expense when the contract commits you to three separate costs.

Put specific questions to the franchisor:

• Will my contribution fund campaigns in Lebanon, or campaigns abroad as well?
• Do expenses include content production, agency fees and marketing team salaries?
• Can the money be used to recruit new franchisees rather than attract customers to outlets?
• How are franchisor-owned outlets treated, and do they contribute on a comparable basis?

Each outlet does not necessarily need to receive spending equal to its contribution, since collective advertising may benefit the whole network. However, you should know this principle in advance and understand the criteria used to allocate the budget between markets and channels.

2. Examine actual spending, not just polished campaigns

Ask for available spending summaries from previous periods, the forthcoming marketing plan and a sample of the report franchisees receive. The aim is not to access confidential customer information, but to establish whether management can link the money collected to understandable spending categories. If the fund is new, request an initial budget and written reporting arrangements rather than a track record that does not yet exist.

Review the distinction between direct advertising expenditure and administrative expenses with an independent accountant. Ask about fees paid to companies connected to the franchisor, how those companies are selected, and whether rebates from advertising platforms or agencies are credited to the fund. Using a related party is not, in itself, evidence of wrongdoing, but you should seek enough transparency to prevent undisclosed conflicts of interest.

Also speak to existing franchisees, with their consent, about how regularly reports arrive and how easy it is to obtain explanations. Ask about a specific campaign: what was its objective, how was it delivered, and what information did outlets receive? This is more revealing than simply asking whether they are happy with the marketing.

In Lebanon, assess whether the plan suits the customers you will serve: the language of the content, delivery coverage, the channels used and the timing of promotions. Views alone do not demonstrate sales. Look for indicators such as visits, orders and the use of campaign codes, while recognising that measuring impact is not always straightforward.

3. Turn transparency into contractual rights

Do not settle for a statement that ‘the franchisor provides marketing support’. Ask for a schedule setting out permitted uses of the money, reporting frequency and the deadline for responding to queries. You can also negotiate an independent review of the fund’s accounts, specifying who pays for it and what findings franchisees will receive.

Discuss limits on the franchisor’s power to change contributions or introduce additional charges for exceptional campaigns. The contract should explain how changes can be made, what advance notice is required, and any caps or approvals agreed by the parties. These are rights to negotiate and record in the contract, not automatic legal guarantees for every buyer.

It is also useful to settle the following points in writing:

• What happens to unspent money, and whether it can be carried forward to the following year.
• How a fund deficit is handled, and who bears any budget overrun.
• The deadline for approving local advertising you propose, and the grounds for rejecting it.
• Who bears the cost of discounts in mandatory campaigns.

For example, a nationwide campaign may appear to be fully funded by the marketing fund, while your outlet absorbs the discount on every order. Ask for a breakdown separating the cost of buying advertising from the cost of the promotion itself, and do not assume that the former covers the latter.

4. Place the agreement in its Lebanese legal context

Lebanon has no comprehensive law specifically governing franchise agreements, nor a franchise-specific statutory disclosure regime of the kind found in some countries. Depending on the issue, provisions of the Code of Obligations and Contracts, the Commercial Code, and rules on consumer protection, trade marks and competition may apply. This makes precise drafting of marketing and accounting obligations particularly important, rather than assuming that the fund benefits from specific legal protections.

Do not confuse the law with the Lebanese Franchise Association’s Code of Ethics, which includes disclosure obligations for its members within its scope. It is not general legislation binding on all franchisors. Similarly, whether Legislative Decree No. 34/1967 on commercial representation applies requires an examination of the nature of the relationship; calling the agreement a ‘franchise’ does not settle the question. Ask a Lebanese lawyer to review the legislation in force and the legal classification of the agreement before you sign.

The practical takeaway: Do not agree to a marketing contribution until you have a clear definition of the fund, an understandable budget and contractual rights to reporting and accountability. Buy into a system you can evaluate, not a promise of wider brand exposure.