Buying a Franchise in Lebanon: Securing Your Right to Sell the Outlet and Transfer the Franchise

Before buying a franchise in Lebanon, ask how you would sell it if your plans changed. You might find a suitable buyer and have equipment in good condition, yet be unable to transfer the right to operate under the brand on the terms underpinning your asking price. In franchising, resale potential is not a detail to leave until later: it is part of assessing the investment from the outset. It needs to be backed by clear contractual procedures, not a promise that the franchisor will ‘co-operate later’.

1. Separate the sale of the outlet from the transfer of the franchise agreement

‘Selling the outlet’ can mean several different transactions: selling equipment and stock, selling the business as a going concern, selling shares in the operating company, or assigning the franchise agreement. Do not assume that completing one automatically transfers the other rights. Buying the equipment does not, in itself, entitle the buyer to use the brand.

Lebanon has no comprehensive franchise-specific law, nor a general regulatory framework specifically for franchising that requires a pre-sale disclosure document or registration of a franchise agreement as such. The relationship is governed primarily by the Code of Obligations and Contracts, the Commercial Code and other rules relevant to the nature of the transaction. Transactions involving a business as a going concern are also subject to their own provisions, so its sale cannot simply be reduced to a franchise assignment form.

Ask a Lebanese lawyer to establish exactly what you will own, what can be transferred and which procedures apply to each route. If the relationship includes elements of commercial representation, have the lawyer assess whether Legislative Decree No. 34 of 1967, as amended, could apply, rather than assuming that the contract’s title alone gives you protection.

Also review the definition of ‘transfer’ in the draft agreement. Does it cover selling a small shareholding, changing control of the company, bringing in a partner or transferring ownership between family members? A broad definition could make financing or an internal reorganisation subject to the franchisor’s approval, even if the manager and outlet remain unchanged.

2. Turn franchisor approval into a workable process

The franchisor may require approval of the buyer to protect operating standards. The problem is not simply the need for approval, but the absence of criteria or a deadline. The phrase ‘subject to the franchisor’s prior approval’ does not tell you when to expect a response or what is needed to complete the application.

Negotiate a schedule setting out:

• The buyer’s required qualifications, such as financial capacity, experience and willingness to undergo training.
• The documents needed for the application and who is responsible for submitting them.
• The deadline for confirming that the application is complete and the deadline for a decision once it is complete.
• How approval or refusal will be communicated, including written reasons for refusal.
• An opportunity to supply missing information or propose an alternative buyer.

Ask for a contractual restriction preventing approval from being withheld or delayed without an agreed, objective reason. This is a point to negotiate, not a specific protection that arises automatically when you buy a franchise in Lebanon. Equally, do not treat the franchisor’s silence as approval unless the agreement clearly addresses the effect of silence and your lawyer has checked the validity of the wording.

Pay attention to any right the franchisor has to buy the outlet before a third party or to match the buyer’s offer. Specify what triggers that right, the documents needed to trigger it, the deadline for exercising it and how offers involving deferred payments or non-cash terms will be compared. Leaving the process open-ended could drive a serious buyer away.

3. Calculate how transfer conditions affect the resale price

Do not stop at asking about the assignment fee. Request a breakdown of all amounts and conditions that may be required to complete the transfer: reviewing the application, training the buyer, settling outstanding amounts and any works the franchisor requires when the operator changes. Specify who pays each item and how it will be substantiated, and negotiate a fixed amount or a clear calculation method wherever possible.

The most important question is whether the buyer takes over the remaining term of your agreement or signs a new one. If it is a new agreement, what fees and obligations will apply? The buyer may reduce their offer if they discover that the economics of running the business will change after the transfer.

Work with your accountant on a calculation starting with the expected sale price, then deducting outstanding amounts, transfer fees, professional fees, costs and potential taxes according to the deal structure. Separately identify funds that will not be released immediately, such as deposits or security that require a separate settlement.

Do not promise the buyer a particular franchise term or set of conditions before obtaining written confirmation from the franchisor. Ideally, the buyer’s final financial commitments should be conditional on obtaining the specified approvals, so that you do not become liable for a promise you cannot fulfil.

4. Fix the date responsibility transfers and secure your release

The franchisor’s approval of an incoming buyer does not necessarily release you from past or future obligations. Ask for a transfer agreement specifying its effective date, the rights being transferred, the debts that remain yours, the obligations the buyer assumes and how claims discovered after handover will be handled.

Review any personal guarantees and security you have provided separately. Do not assume that leaving the company or handing over the keys cancels them. Obtain a written release from the relevant beneficiary, or agree an acceptable alternative arrangement that precisely defines any continuing liability and its duration.

As far as possible, arrange for completion steps to happen together: signing the transfer documents, confirming the buyer’s right to operate, settling payments and handing over the outlet. Record the stock, equipment and outstanding account balances in a handover document, and do not hand over the means to use the brand before the necessary approvals take effect.

The practical takeaway: Before buying, ask for a written resale process defining an acceptable buyer, the approval deadline, costs, the terms for transferring the agreement and how you will be released from your obligations. Your ability to sell starts with the agreement you sign when you buy.