Reserving a Franchise in Lebanon: Deposit Terms Before Signing

A Lebanese business owner may ask a serious prospective franchisee for a payment to reserve a franchise opportunity before completing a site assessment or agreeing the final contract. But transferring money does not, by itself, answer the key questions: what has been reserved, and when will the money be refunded? In franchising, a clear relationship begins before signing. This guide explains how to structure a preliminary reservation, not how to price the franchise rights themselves.

Separate the reservation from the grant of franchise rights

Before requesting any money, establish why you need a reservation agreement. Will you stop negotiating with other candidates over a specific opportunity? Will you allocate your team’s time to assessing the candidate’s application? Or are both parties already ready to enter into a franchise agreement? Each situation involves different obligations, and they should not all be grouped under the word ‘deposit’ without explanation.

Describe precisely what the candidate receives during the reservation period. This might be a limited priority in negotiations, or a temporary commitment not to offer a particular opportunity to anyone else. Also specify what the reservation does not grant: paying the money does not make the candidate a franchisee or entitle them to open premises under the brand or order equipment in the franchisor’s name, unless a separate agreement permits this.

Avoid statements such as ‘the territory is yours’ in messages if the document grants only priority in negotiations. Clearly identify the parties and their roles, and specify who is authorised to receive money and issue a receipt in the contracting entity’s name. Consistency between your messages and the document matters more than choosing a reassuring title for the agreement.

Understand Lebanon’s legal framework before accepting money

Lebanon has no comprehensive law specifically governing franchise agreements. The relationship is primarily subject to general legal rules, notably the Code of Obligations and Contracts, alongside commercial rules and other relevant legislation depending on the business activity and the rights covered by the agreement. Legislative Decree No. 34 of 1967 on commercial representation may also be relevant, depending on how the relationship is legally characterised; the document’s title alone does not settle the issue.

Nor is there a franchise-specific disclosure regime imposing a uniform Lebanese waiting period before payment or signing. Do not import time limits from other countries into your agreement on the assumption that they are mandatory locally. However, the absence of specific legislation does not diminish the importance of good faith, clear information that affects the candidate’s decision, and avoiding misleading promises.

Describing the payment as a ‘deposit’ is not enough to determine its legal effects. Ask a Lebanese lawyer to review whether the wording creates only a reservation for negotiations, an obligation to enter into a subsequent contract, or an agreement with other legal consequences. The document should explain what happens to the money if either party withdraws or the application is rejected, rather than assuming that both parties understand the word in the same way.

Put the reservation terms and payment arrangements in one document

Keep the reservation agreement short but complete. Do not leave the financial terms in a separate receipt, the reservation period in a text message and the exceptions in a verbal conversation. Include at least the following:

• Subject of the reservation: The opportunity concerned and its scope, without implying that any unagreed rights have been granted.
• Start and end dates: When the commitment begins, how it ends and whether an extension requires written agreement.
• Steps for each party: What the candidate must provide, what the franchisor will review and when a response is due.
• Nature of the payment: Whether it is refundable, will later be credited towards the initial franchise fee, or pays for specified work.
• Circumstances in which no contract is concluded: Withdrawal by the candidate, rejection by the franchisor, failure to meet a condition, or expiry of the reservation period without agreement.
• Settlement arrangements: The refund deadline and method, together with any agreed deductions and how they are calculated.

If you intend to deduct the cost of assessment work actually completed, describe that work, cap its cost and set out how approval will be obtained in advance. Do not use a broad clause allowing ‘all expenses’ to be deducted without supporting documents or clear limits. Ask your lawyer to review whether any non-refundable payment terms are enforceable; emphatic wording is no substitute for sound legal drafting.

Also specify the payment currency and refund method, and record every payment with a receipt consistent with the agreement. If the payment is credited towards franchise fees after signing, confirm this in writing so that the candidate is not charged the same amount twice.

Test the agreement before using it with your first candidate

Test the document against realistic scenarios: what happens if the franchisor rejects the candidate’s application after receiving the money? What if the parties cannot agree on the final contract? What if the assessment is delayed because documents are missing? You should be able to identify the financial outcome in each case without reopening negotiations about what the reservation means.

For example, if the reservation depends on approval of a proposed site, do not simply state ‘subject to approval’. Specify the deadline for submitting the site, which party must communicate the decision, and how rejection affects the payment. There is no need to guarantee site approval or business success; the aim is to establish what happens if the condition is not met.

Train everyone who communicates with candidates on the limits of the agreement, and retain a signed copy and a record of payments and decisions. When the reservation ends, send a notice confirming the outcome and the financial settlement, whether negotiations have ended or progressed to a franchise agreement.

Practical takeaway: Do not accept a reservation payment until the candidate can understand three things in writing: what they receive in return, how long the reservation lasts, and when their money will be refunded or credited towards fees.