Franchising and Commercial Representation in Lebanon: Review Your Contract Before Expanding

When you decide to franchise an established business in Lebanon, simply labelling an agreement to distribute your products a ‘franchise agreement’ is not enough. The nature of the rights and obligations, and how they are put into practice, may raise the question of whether commercial representation rules apply. Responsible franchise expansion therefore starts with a focused legal review: are you granting access to a complete business format, or creating a distribution or representation relationship that requires different treatment?

Why assess the legal classification first?

Lebanon has no standalone, comprehensive law governing franchise agreements, nor a franchise-specific mandatory disclosure regime comparable to those in some other countries. This does not mean the relationship is unregulated. Agreements are subject to the Code of Obligations and Contracts, while the Commercial Code, intellectual property rules and consumer protection provisions may also apply, depending on the subject of the relationship and actual business practices.

The legislation requiring particular attention here is Legislative Decree No. 34 of 5 August 1967 on commercial representation. Legal commentators and courts have taken differing views on whether its provisions can apply to franchise agreements. It is therefore incorrect to say either that every franchise constitutes commercial representation or that calling an agreement a franchise automatically rules out that possibility.

The classification may affect fundamental matters, including the conditions for carrying on the activity, certain ownership and management requirements where a foreign investor is involved, dispute resolution, and rights arising when the relationship ends. Ask a Lebanese lawyer to analyse these issues before adopting a contract template or presenting it to prospective franchisees, rather than after agreeing the commercial terms.

Map the actual relationship before drafting the clauses

Start by describing what will happen day to day between your business and the franchisee. Avoid general expressions such as ‘brand partner’ or ‘our agent’; instead, set out verifiable activities and responsibilities. This will help your lawyer assess the relationship beyond the language of the sales pitch.

Prepare a document answering the following questions:

• Will the other party receive know-how and an operating system, or will its role be limited to selling products bearing your brand?
• Will it buy and resell goods on its own account, or act as an intermediary in securing transactions on your behalf?
• Who will invoice customers, receive payments, and bear responsibility for returns and debts?
• Can the other party bind your business to contracts or commitments with third parties?
• What technical assistance and operational supervision will you actually provide?
• Will there be exclusivity, and if so, what will it cover: use of the brand, product distribution or commercial representation?

These questions are not a mechanical test that produces a definitive legal answer. They do, however, identify the elements requiring analysis and prevent the relationship from being reduced to a single provision, such as a franchise fee or a trade mark licence.

Demonstrate the substance of the business format, not just its name

In franchising, what you grant usually goes beyond the right to sell a product. It involves access to know-how and use of a brand, together with technical and commercial assistance, while the franchisee remains legally, managerially and financially independent. Your business documentation should therefore reflect these elements where they genuinely exist.

Gather concrete examples of the system the other party will use: service delivery procedures, product presentation standards, operational monitoring processes and methods for transferring know-how. Accompany these with a precise description of what the franchisor will provide and what the franchisee will be responsible for. The aim is not to rewrite the operations manual, but to demonstrate that the proposed legal classification rests on a genuine business format.

For example, if your business sells packaged products and the agreement merely gives a trader the right to resell them, do not assume that adding a shared logo and an initial fee will, by itself, turn the relationship into a franchise. Equally, if you are granting access to a complete operating system, do not leave the contract drafted solely in the language of goods distribution. In both cases, the wording must match reality, rather than adding artificial obligations to avoid a particular legal classification.

Align the contract and correspondence with the review findings

Once the analysis is complete, ask for a review of documents that might describe the relationship inconsistently: the draft agreement, commercial proposal, order and invoice templates, and communications used to recruit prospective franchisees. Describing a candidate as an ‘exclusive agent’ in correspondence while the contract denies any representation relationship creates avoidable ambiguity.

Clearly define the limits of the franchisee’s authority in dealings with third parties, how its legal identity will be presented in transactions, and who will bear responsibility for its operational obligations. Do not, however, treat an independence or no-agency clause as sufficient protection: actual practice must also be consistent with it.

If a foreign investor is involved, request an additional review of the applicable ownership, management, residency and work requirements. Restrictions associated with certain exclusive commercial representation activities should not be generalised to every franchise business, but nor should they be ignored simply because the arrangement is labelled a franchise.

Conclude the review with a memorandum setting out the proposed legal classification, the reasons supporting it, areas of uncertainty and the changes required. Reassess the relationship if the franchisee’s role changes later, particularly if it is given authority to negotiate or enter into contracts in your name.

Practical takeaway: Before offering your business as a franchise, map the actual relationship, gather evidence of its substance and ask a Lebanese lawyer to assess whether commercial representation rules may apply. A sound contract describes what you will actually do; it does not rely on its title to protect you.