Franchise Agreement Terms and Renewal in Lebanon: Getting the Conditions Right

When turning an established business in Lebanon into a franchise, it is easy to focus on initial fees and fitting out the outlet, leaving the length of the relationship for later. But saying that an agreement is ‘renewable’ is not enough to establish clear expectations. The term and renewal conditions affect investment decisions, operational continuity and trust across the franchise network. The aim is not to choose a commonly used number of years, but to establish a process whose workings and costs both parties understand from the outset.

Link the agreement term to the actual investment

Start with a breakdown of what the franchisee will spend to establish the outlet: equipment, fit-out works, systems, the initial franchise fee and pre-opening expenses. Distinguish between assets that can be used elsewhere later and expenditure tied exclusively to the brand or premises. The greater the investment whose value would be difficult to recover outside the relationship, the more important it is to discuss a term that offers a realistic opportunity to recoup it.

Use data from your existing business to estimate cash flows under different scenarios, not to promise prospective franchisees that they will recover their capital. Test the effects of a delayed opening, lower sales or higher operating costs. Then ask: does the proposed term still look reasonable if the most optimistic scenario does not materialise? These calculations are a tool for negotiation and assessment, not a guarantee of profit.

Define precisely when the term begins. Does it start when the agreement is signed or when the outlet opens? If it starts on opening, what is the deadline for opening, and how will delays be handled? If it starts on signing, does the prospective franchisee understand that the months spent preparing the outlet will reduce the operating period available?

Check that the franchise term aligns with the lease term and any options to extend it. Renewing the franchise does not automatically renew the lease, and a promise to continue at the premises is of little use if the right to occupy them expires first. This is about ensuring that obligations align, not requiring ownership of the property.

Draft the renewal process within Lebanon’s legal framework

Lebanon has no comprehensive franchise-specific law or standardised franchise disclosure regime. As a general rule, the agreement is governed by the general provisions of the Code of Obligations and Contracts, alongside commercial rules and other relevant legislation. Do not therefore copy renewal deadlines or procedures from a foreign template and present them as Lebanese requirements.

The legal classification of some relationships may also raise questions about the application of Legislative Decree No. 34 of 1967 on commercial representation. Simply calling a document a ‘franchise agreement’ does not settle the issue. Seek a legal review of the nature of the relationship and the implications of its term and renewal provisions before finalising the wording.

Distinguish clearly between three contractual mechanisms, without assuming that any of them is an automatic statutory entitlement:

• Automatic renewal: the agreement continues under the agreed mechanism unless the required notice is given within the specified period.
• Conditional renewal option: the franchisee may request to continue if they meet written, verifiable conditions.
• Renewal by a new agreement: continuation requires both parties’ consent; submitting a request alone is not enough.

Choose the mechanism you actually intend to use, then specify the renewal term and any limit on the number of renewals. Avoid combining wording that suggests a guaranteed right with a clause giving the franchisor absolute discretion to refuse. That creates conflicting expectations within the same document.

Make the conditions for continuing measurable

Do not rely solely on a condition requiring ‘the franchisor’s satisfaction with performance’. Translate it into requirements the franchisee can understand and monitor, such as settling amounts due under the agreement, remedying documented breaches, holding the right to occupy acceptable premises and completing specified operational requirements for renewal.

Link each condition to supporting evidence and an assessment method. If there is a breach, how will the franchisee be notified? Will they have an opportunity to remedy it before a decision is made? If payments are disputed, how will the assessment distinguish them from undisputed amounts due? Review these details with a lawyer rather than leaving them to the judgement of whoever handles the file later.

Clarify the costs too. State whether renewal involves a fee, how it is calculated and what it covers. If you require equipment or fit-out upgrades, separate their cost from the renewal fee and specify how the scope of works and implementation timetable will be approved. Do not leave the franchisee to discover a substantial investment obligation when there is little time left to make an informed decision.

If continuation depends on signing an updated form of agreement, make that clear from the outset and specify when it will be provided for review. The phrase ‘the terms then in force’ alone does not give a prospective franchisee an adequate picture of the potential obligations.

Turn renewal into a clear administrative process

Create a calendar for each agreement covering its expiry date, the deadline for requesting renewal, the date for submitting documents, the response period, and how notices must be sent and receipt evidenced. These deadlines should be set contractually to suit the relationship; they are not standard statutory periods for franchises in Lebanon.

Appoint someone to coordinate the file and bring together feedback from operations, finance and legal teams into a single assessment. Clearly identify any missing information or unmet requirements, and document the decision and its reasons in line with the agreed process. Do not rely on a verbal conversation or continued dealings alone as proof of renewal. Put any temporary continuation arrangements in writing and have them legally reviewed.

Practical takeaway: before offering your first franchise, prepare a summary sheet covering the start and end of the term, the renewal mechanism, conditions, costs and deadlines. If both parties cannot understand it in the same way, the wording needs revising before signature.