Franchise Profit Projections in Lebanon: How to Present Them Without Misleading Investors

When you decide to franchise an established business in Lebanon, prospective franchisees will ask a direct question: ‘How much could I earn?’ A professional answer is neither a promise nor simply a disclaimer beneath an appealing table. It is a financial presentation that explains where the figures come from, the limits of any comparisons and what might change at the new outlet. In franchising, this transparency helps build a realistic partnership before anyone commits to rent, fit-out costs and fees.

1. Separate your business results from franchisee projections

Start by classifying every figure you intend to present: is it an actual result from an existing outlet, an estimate for an outlet that has yet to open, or a management target you hope to achieve? Do not group all three under ‘projected profits’. A target is not evidence that it can be achieved, and the success of your outlet does not prove that the next location will repeat the result.

Prepare a summary of the actual data, covering the reporting period, type of location, outlet size, opening hours and whether sales include delivery or other channels. Also explain whether the results reflect the launch phase or an established operation, and show the effects of seasonality rather than selecting only the busiest months.

Next, review costs that may be hidden within the original business’s accounts. Does the founder work without a salary being accounted for? Does the outlet occupy premises owned by the business? Does it receive accounting or marketing services from the parent company without a clearly allocated charge? These advantages may make historical profitability higher than an independent franchisee could achieve.

Present two separate sets of figures: actual results as recorded, and the adjustments used to build the model for the new outlet. Do not rewrite the past to make it appear repeatable. Explain the differences and their reasons, and retain the documents needed to check the calculations.

2. Build projections from assumptions that can be challenged

Rather than starting with a desired profit figure, build the model around business activity: daily transaction numbers, average transaction value and trading days, followed by the cost of products or services and operating expenses. Link each assumption to a clear source, such as records from the existing outlet, a recent quotation or an estimate that needs checking on the ground.

In Lebanon, the currency basis must be explicit. Specify the currency used for the model, how you converted expenses or revenue recorded in another currency, and the date of the prices used. Do not combine revenue calculated on one basis with old costs converted on another, as this may suggest an unrealistic margin.

Include the expenses the franchisee will actually bear, which may include, depending on the business:

• Rent, salaries, management remuneration, insurance and maintenance.
• Electricity, alternative power supplies, telecommunications and operating systems.
• Wastage, delivery, payment processing fees and discounts.
• Royalties, marketing contributions and agreed recurring expenses.

State whether the result presented is before or after tax, financing costs and depreciation. Operating profit is not necessarily the amount available to withdraw, and recovering the initial investment is not the same as reaching break-even.

Provide a base case and a less optimistic scenario, clearly identifying changes to the assumptions that materially affect the outcome. If you present an estimated payback period, explain how it is calculated, which investment costs it includes, and how a delayed opening or slower sales growth would affect it. The less optimistic scenario should not be merely a cosmetic variation on the base case.

3. Align your wording with Lebanon’s legal framework

Lebanon has no comprehensive franchise-specific law or statutory franchise disclosure regime requiring a standard format for presenting profit projections. However, the absence of such a regime does not mean that financial promises are beyond legal scrutiny. The relationship is governed primarily by the Code of Obligations and Contracts, including rules on consent, fraudulent misrepresentation and liability. Provisions of the Commercial Code and other general rules may also apply, depending on the nature of the relationship and the facts.

In practice, the way figures are presented may have legal significance if it induces a prospective franchisee to enter into a contract on the basis of misleading information. Ask a Lebanese lawyer to review the financial presentation and its wording alongside the contract, rather than simply reviewing a clause stating that the franchisor does not guarantee a profit.

Use precise wording such as ‘historical results for this outlet during the specified period’ or ‘an estimate based on the accompanying assumptions’. Avoid ‘guaranteed profit’ and ‘certain payback’, and do not rely on a small-print warning that contradicts the presentation’s main message.

If a professional code applies to the franchisor through membership or a commitment to follow it, check its requirements too. A code remains distinct from the law and should not be presented as a general mandatory disclosure regime for all franchisors in Lebanon.

4. Standardise the presentation and record what the prospective franchisee receives

Appoint someone to approve the financial presentation before it is circulated. The franchise recruitment team and brokers should use the same presentation, and no one should add higher verbal projections to close a deal. Give each version a date and number, and define when changes in prices or operations require an update.

Attach a list of assumptions and exclusions, and allow prospective franchisees to review it with their accountant and legal adviser. Document substantive questions, answers and amendments. Ask for acknowledgement of receipt of the specific version, not an acknowledgement suggesting that a signature absolves you of responsibility for the accuracy of the information.

The practical takeaway: Before presenting any projected profit, make sure you can explain its source, reproduce the calculation and show what happens if the assumptions do not hold. If you cannot, do not use it to persuade a prospective franchisee to invest.