Exclusive Franchise Territories in Lebanon: How Should You Define Them?

When turning an existing business in Lebanon into a franchise, offering an ‘exclusive territory’ may seem an easy way to reassure an investor. But it can become a source of disagreement if the franchisee understands it as protection against all sales under the brand, while you mean only that no other outlet will open nearby. Building a stable franchise network starts with defining the rights granted, the exceptions and how overlapping orders will be handled—before making any promise of exclusivity.

1. Define the protection before mapping the territory

Exclusivity does not follow automatically from the right to use a brand. It is a contractual arrangement whose scope must be defined and whose legality must be reviewed. Start by asking: which activities are you undertaking not to carry out within the territory, and which are you undertaking not to authorise others to carry out? The answers may differ for opening a shop, operating a collection point, providing a mobile service and selling through a website.

Describe the intended protection clearly, for example:

• Not granting a franchise for another outlet of the same type within the agreed boundaries.
• Not opening a franchisor-owned branch within those boundaries, if the agreement provides for this.
• Allocating specified delivery orders to the outlet according to the delivery address and its operational capacity.
• Excluding certain channels, such as corporate sales or temporary sales outlets, with those exclusions described in advance.

Do not bundle these rights under a general phrase and then explain them verbally. If the protection applies only to physical outlets, say so explicitly. If you reserve sales channels, explain how they will operate so that the exceptions do not become direct competition that strips the protection of its commercial value.

Before offering a territory to a prospective franchisee, review your existing business’s sales by the sources of orders you can identify. The aim is not to draw attractive boundaries on a map, but to ensure you are not making a promise that will prevent future expansion or create expectations the outlet cannot meet.

2. Turn the geographical description into operating rules

Phrases such as ‘Beirut and its suburbs’ or ‘the area around the outlet’ are not enough to define a long-term commitment. Use a dated map attached to the agreement, together with a written description of the boundaries based on streets, fixed landmarks or clearly defined administrative boundaries. Specify which takes precedence if the map and the written description conflict.

Also distinguish between the place of sale and the customer’s location. A customer from outside the territory may visit the shop in person, while a customer within it may order through a platform managed centrally by the brand. Address each of the following situations separately:

• An in-store sale to a customer who lives outside the territory.
• Delivery from one outlet to an address within another outlet’s territory.
• An order placed online and collected in-store.
• A corporate order involving delivery addresses across several territories.

For example, if the territory is protected only against the opening of other outlets, do not assume that all online orders originating there automatically belong to the franchisee. Set out the allocation rule: does it depend on the delivery address, the outlet chosen by the customer or the capacity to fulfil the order? Also clarify who bears the delivery cost and who handles returns relating to these orders.

Test the rules internally using hypothetical orders before adopting them. If your team cannot identify the responsible outlet without referring back to you, the wording needs further refinement.

3. Review exclusivity within Lebanon’s legal framework

Lebanon has no comprehensive franchise-specific law, nor a mandatory franchise disclosure regime comparable to those in some other countries. That does not, however, place exclusivity beyond legal scrutiny. The relationship is subject to general legal rules, principally the Code of Obligations and Contracts, alongside commercial rules and intellectual property protections, depending on the obligation concerned.

Article 166 of the Code of Obligations and Contracts recognises freedom to structure contractual relationships within the limits of public policy, public morals and mandatory legal provisions. Agreement between the parties alone is therefore not enough to make every geographical or commercial restriction valid and enforceable.

Exclusivity also calls for a review under Competition Law No. 281 of 2022, particularly where arrangements include restrictions on market allocation or dealings with customers. This does not mean that every form of territorial protection is automatically prohibited. The restrictions, their effects and the circumstances in which they operate must be assessed, rather than simply copying a clause from a foreign agreement.

You should also examine whether Legislative Decree No. 34 of 1967 on commercial representation may apply, based on the true legal nature of the relationship and the legislation in force. Calling the agreement a ‘franchise’ does not settle the issue on its own. Have the territory clause reviewed by a lawyer alongside the rest of the agreement, not in isolation, and do not assume that exclusivity gives the franchisee ownership of the brand within the territory.

4. Set out how overlaps and changes will be handled

A new delivery platform, an outlet in a shopping centre or an opportunity to fulfil a large order may emerge later. Agree in advance on how these situations will be handled, rather than giving the franchisor an unrestricted right to change the territory unilaterally.

Specify who receives complaints about territorial overlap, what documents are needed to assess them, who reviews order records and how incorrect allocations will be corrected. Any permanent change to the boundaries or protected channels should be recorded in writing and approved in accordance with the agreement, with its effect on financial and operational obligations clarified where relevant.

Keep a central register of the territories granted and the exceptions applying to each. Check it before making any new offer, so that the expansion team does not promise the same rights to different prospective franchisees.

Practical takeaway: Before granting exclusivity, prepare a clear map, a list of included and excluded channels, rules for allocating orders and a written procedure for resolving overlaps. Then have a Lebanese lawyer review these alongside the agreement. Effective protection is protection that both parties can understand and apply.