Payment Currency in Lebanese Franchise Agreements: Clear Rules

When turning an established business in Lebanon into a franchise model, agreeing on the amounts due and their payment dates is not enough. The franchisor and franchisee may interpret the same amount differently if there are no clear rules on currency, conversion and proof of payment. To protect trust across the franchise network, the business needs a written financial procedure that works in practice, rather than a vague phrase such as ‘payment at the market rate’. This guide focuses on how payments are managed, not on setting franchise fees.

1. Separate the currency of calculation from the currency of payment

Start by listing the amounts that will arise from the relationship: recurring fees, product invoices, agreed additional services and any reimbursements due to either party. Do not assume that one rule will suit them all; a commercial invoice may differ in nature from fees calculated on sales.

For each amount, specify three separate elements: the currency used to calculate it, the currency shown on the supporting document and the currency in which it will actually be paid. If these currencies differ, the agreement must explain how conversion between them works, who performs the calculation and how the other party can check it. An accountant should review the legally required format of invoices and accounting entries, separately from the agreed payment currency.

Create a schedule to the agreement covering:

• The type of amount and the party entitled to receive it.
• The calculation currency and accepted payment currency.
• The payment method and designated receiving account.
• The due date and the document establishing it.
• The conversion rule and allocation of bank transfer charges.

Do not use colloquial terms for funds or accounts without defining them. If acceptance of a particular payment method depends on whether the funds can be withdrawn or transferred, state that condition clearly and ask a Lebanese lawyer to review its legality and enforceability before adopting it.

2. Set a conversion rule that both parties can reproduce

The phrase ‘at the applicable exchange rate’ is incomplete unless it identifies the source and the date on which the rate is determined. Specify a verifiable source and explain which rate to use if it publishes more than one. Then choose the relevant point in time: the transaction date, the end of the accounting period, the invoice date or the payment date. This commercial choice must be consistent with the accounting treatment and legal requirements.

Do not leave the treatment of late payments implicit. If the rate changes between the due date and the payment date, it should be clear which date governs the conversion. Any compensation or interest for late payment requires separate drafting and legal review, rather than an automatic addition to a spreadsheet.

Also establish a fallback procedure if the source stops publishing rates or cannot be used: a specified alternative source, followed by a procedure for reaching written agreement if that alternative is unavailable. Avoid giving either party the power to choose the rate unilaterally after the debt has arisen.

Where recurring fees are calculated on sales in different currencies, specify whether each transaction is converted at the rate on its own date or whether sales are aggregated using another agreed method. Treat refunds in the same way, or apply a clear rule that ensures consistency. Test the rule using actual transactions from your business, with customer details removed, to ensure that the accountant and franchisee arrive at the same result.

3. Link payments to documentation and regular reconciliation

A transfer notification alone does not answer every question: have the funds arrived? Has a fee been deducted? Which invoice has the payment been allocated to? The agreement therefore needs to define clearly when payment is considered complete, taking account of the applicable legal rules.

Use a simple process: a statement of amounts due is issued, the franchisee reviews it and then sends proof of payment including the invoice reference, and the franchisor confirms receipt and allocation of the funds. If cash payments are permitted, require a receipt from an authorised person and comply with accounting and tax requirements, as well as any relevant legal restrictions.

Regular reconciliation should show the original amount, the exchange rate, its source and date, the amount received, charges and the outstanding balance. Set a reasonable contractual deadline for raising objections and a procedure for correcting errors, without treating silence as a blanket waiver of all rights.

To prevent fraud, do not accept a change of bank account on the strength of a single message. Require notification from an authorised person and independent verification through a previously established contact channel. This is a small operational rule, but it protects the flow of funds between members of the franchise network.

4. Review enforceability under Lebanese law

Lebanon has no comprehensive franchise-specific law, nor a mandatory franchise disclosure regime equivalent to those in some other countries. The relationship is governed primarily by the Code of Obligations and Contracts, with commercial, tax, intellectual property and other rules applying according to the obligation concerned. The absence of dedicated legislation does not mean that every currency clause chosen by the parties is automatically enforceable.

Currency and payment arrangements must take account of the Code of Money and Credit, mandatory legal provisions and relevant case law. Ask your lawyer to review the distinction between denominating a debt in a foreign currency, requiring payment in that currency and accepting a particular payment method. These issues are connected, but they are not legally identical.

Nor should Legislative Decree No. 34 of 1967 on commercial representation be assumed to apply to every franchise agreement; the legal classification and substance of the relationship require legal assessment. Do not copy currency clauses from a foreign agreement without adapting them to the Lebanese context.

Practical takeaway: Before granting a franchise, prepare the currency schedule, conversion rule and reconciliation template, then test them from an accounting perspective and have them legally reviewed. Do not sign until both parties can determine what will be paid, how and when — and arrive at the same result.