Pre-contract Franchise Disclosure in Lebanon: A Practical Guide

Before turning an established business in Lebanon into a franchise network, you need more than an attractive pitch and a ready-made contract. Prospective franchisees need information on which to assess the investment, and you need a clear record of what you have presented to them. This is where a voluntary disclosure pack comes in: a practical document explaining the opportunity and its limitations, without revealing operational secrets or guaranteeing profits.

1. Understand the place of disclosure in Lebanese law

Lebanon has no comprehensive franchise-specific law, nor a franchise disclosure regime requiring a standard document or a set waiting period before signing, as some countries do. Do not therefore present your pack as a government-approved template, or import foreign requirements and describe them as mandatory locally.

The relationship is governed primarily by the Code of Obligations and Contracts, including its rules on valid consent, defects in consent such as mistake and fraud, contractual obligations and liability. The Commercial Code, tax legislation and sector-specific rules also apply according to the nature of the business. Trade marks are subject to commercial and industrial property protection rules, including Decision No. 2385 of 1924, as amended.

As for Legislative Decree No. 34 of 1967 on commercial representation, you should neither assume that it applies to every franchise nor rule it out simply because the agreement is labelled a ‘franchise’. The legal classification and substance of the relationship require legal review, particularly where distribution and exclusivity are combined with trade mark use and the transfer of know-how.

The absence of a specific disclosure law does not make misleading information acceptable. Have a Lebanese lawyer review the pack and agreement together, and ask them to check the latest legislation and case law before you begin recruiting franchisees.

2. Build the pack around investors’ real questions

Start by identifying the entity that will grant the franchise, its authorised signatories, the business’s history and the experience of the team responsible for support. Clearly distinguish between company-owned outlets and units run by independent franchisees. If this is your first franchise, say so explicitly: the success of your own outlet is not automatic proof that a network will succeed.

Organise the content into short sections that can be compared with the draft agreement:

• Rights granted: The business activity, territory, scope of exclusivity, and arrangements for online sales and delivery.
• Trade mark: Its owner, registration status, the limits of your right to license its use, and any material dispute relating to it.
• Support: Initial training, opening support, subsequent visits, and anything the prospective franchisee must pay for separately.
• Supply: Approved suppliers, purchasing terms, alternatives in the event of disruption, and any financial benefit the franchisor receives from purchases.
• Exit: The term, renewal, transfer, termination, and what happens to stock, equipment and signage.

Also include material risks and disputes that could affect the franchisor’s ability to deliver on its promises. The aim is not to overwhelm prospective franchisees with company documents, but to help them understand what they are buying—and what they are not.

3. Separate verified figures from projections

Financial information is the most sensitive part of disclosure. Break down the amounts into the initial franchise fee, fit-out and opening costs, opening stock, working capital, and recurring and marketing fees. State who receives each payment, when it is due, whether it is refundable, and whether taxes are included or added on top.

In Lebanon, clearly specify the currency of each amount and the payment arrangements. If calculations require currency conversion, define the agreed exchange-rate reference and timing following legal and accounting review. Do not leave a phrase such as ‘at the exchange rate’ open to interpretation.

When presenting a pilot outlet’s results, identify the period, location and data source. Explain whether the results account for market-rate rent, the salary of a manager replacing the founder, and the costs of backup power, maintenance, delivery and wastage. An outlet operating from premises owned by the founder may appear more profitable than a new unit renting its site.

Distinguish between three categories: documented actual results, cost estimates and future scenarios. For each scenario, state its assumptions, such as demand, material costs and staffing levels. Do not present the best month as typical performance, or describe the investment payback period as guaranteed. A disclaimer that results are not guaranteed does not remedy inherently misleading data.

4. Manage disclosure and protect confidential know-how

Use a staged disclosure process. First, give prospective franchisees a non-confidential summary of the business and expected investment. Once you have established that they are serious and they have signed an appropriate confidentiality agreement, provide the detailed pack and draft contract. Do not distribute complete recipes, technical settings or sensitive operating procedures during recruitment; instead, provide an adequate description of the know-how to be transferred and how it will be delivered later.

Allow prospective franchisees reasonable time to review the documents with their advisers. Make this a stated internal procedure, not a purported Lebanese statutory waiting period. If you request a reservation deposit, explain its purpose and refund conditions in writing before accepting it.

Give each pack a version number and date, and retain proof of delivery alongside written answers to material questions. An acknowledgement of receipt proves delivery; it does not make inaccurate content correct. If a cost or key term changes before signing, provide a clear update and allow time for it to be reviewed.

5. Check the pack for consistency before using it

Ask your operations manager to review support commitments, your accountant to check the figures, and your lawyer to ensure that the pack is consistent with the agreement. Review verbal pitches and marketing materials too: a carefully qualified pack serves little purpose if a salesperson promises exclusivity or profits that it does not offer.

The practical takeaway: Before welcoming your first serious prospect, prepare a dated pack, traceable figures and a documented delivery procedure. Good disclosure does not sell a dream; it helps both parties make a decision they can justify and put into practice.