Supply in Lebanese Franchise Agreements: Supplier Approval and Alternatives

Your successful business may rely on a supplier who knows your preferences through informal conversations, or on purchases you handle yourself as the need arises. Franchising, however, requires arrangements that an independent franchisee can follow without waiting for your involvement in every order. Across a franchise network, a clear supply system protects the quality of the customer experience and business continuity, provided it does not become a requirement to buy from a single source without defined standards or alternatives. This guide will help you prepare a practical supply schedule before franchising your business in Lebanon.

1. Classify purchases before specifying their source

Start with a list of the materials, products and equipment each outlet needs. Do not treat them all alike: an ingredient that defines your product’s flavour is different from general cleaning supplies, just as equipment tied to a particular production method differs from office furniture.

Divide the list into three operational categories:

• Brand-defining items: These need precise specifications or a designated source to protect the recipe, performance or product consistency.
• Items suitable for multiple sources: These can be purchased from approved suppliers that meet the same specifications.
• General local items: Franchisees can buy these freely, subject to appropriate quality and safety requirements.

For each item, record the specification, the method for checking compliance, storage conditions and, for perishables, the minimum acceptable remaining shelf life on delivery. Also explain why its source is restricted. The phrase ‘to maintain quality’ alone is not enough to guide a purchasing decision or resolve a disagreement over a proposed alternative.

2. Turn supplier selection into a repeatable process

A supplier that suits your existing outlet may not be able to serve additional locations. Ask them to specify their delivery areas, available capacity, order lead times, minimum order quantities and procedures for handling defects and returns. Test their actual ability to meet these terms before presenting them to franchisees as a reliable source.

Create an approval record for each supplier, including their details, approved products, sample test results, delivery terms and review date. If the business activity requires licences or health or technical testing, check the relevant documentation: internal approval does not replace legal requirements.

Set out a clear process for proposing a new supplier: the franchisee submits supporting documentation and a sample where needed, and the franchisor then assesses compliance within a timeframe specified in the contract. State who bears the testing costs and how acceptance or rejection, with reasons, will be communicated. Do not treat silence as approval unless the agreement expressly provides for this and defines its scope.

Make approval specific to the products and locations concerned, rather than granting blanket permission to purchase everything the supplier sells. You should also define the grounds for suspending approval, how outlets will be notified and how they should use or dispose of any compliant stock they already hold.

3. Set out the financial terms of purchasing clearly

Separate supplier approval from the commercial relationship with that supplier. Does the franchisee buy directly, or does the franchisor purchase and resell? Who issues the invoice and bears the costs of transport, insurance and customs clearance, where required? Who pursues claims for shortages or damage?

In Lebanon, the currencies used for pricing and payment, and the conversion mechanism, require particular care. Specify the agreed currency and, if payment is made in a different currency, the source and timing of the exchange rate, with the wording reviewed by a lawyer. Do not leave this to a vague phrase such as ‘at the prevailing rate’.

The supply schedule should also explain:

• How prices may be adjusted and how much notice the franchisee receives before changes take effect.
• Payment and credit terms, and the effect of late payment on outstanding orders.
• How discounts and rebates linked to outlets’ purchasing volumes are handled.
• Whether the franchisor receives any financial benefit from the supplier and how this is disclosed in the contract.

If the franchisor resells at a margin, explain this arrangement without conflating it with franchise fees. Both parties can then assess the true operating costs rather than discovering unexpected charges after opening.

4. Agree on alternatives before supplies are disrupted

Naming a backup supplier is not enough. You must check their ability to provide an alternative, its compliance with specifications and the circumstances in which it may be used. Define the events that trigger the contingency plan: a confirmed delay, a batch rejected for non-compliance, a discontinued product or an inability to arrange transport.

Specify who must give notice, what supporting documents are required and who has authority to approve emergency purchases. A temporary alternative may be approved for a defined quantity or period, with the first batch checked and its effect on the finished product monitored.

For example, if bespoke packaging becomes unavailable, the plan might permit alternative packaging that meets safety requirements and preserves the product’s presentation, without allowing a change to a core ingredient. If no safe, compliant alternative exists, suspending sales of the product may be better than offering a misleading customer experience.

Also allocate the costs of urgent transport, disposal and replacement according to the cause of the problem and the agreed responsibilities. Do not automatically treat every delay as force majeure: determining the legal nature of the event and its consequences requires a review of the contract and applicable law.

5. Review restrictions under Lebanese law

Lebanon has no comprehensive law specifically governing franchising, nor a franchise-specific mandatory disclosure regime comparable to those in some other countries. The relationship is governed primarily by the Code of Obligations and Contracts, commercial rules and other relevant laws, depending on the activity.

When requiring exclusive purchasing or restricting suppliers, you must take account of Competition Law No. 281 of 2022. Do not assume that protecting brand consistency automatically makes every restriction lawful. Consumer protection and product safety rules also remain applicable where relevant.

The possible application of Legislative Decree No. 34 of 1967 on commercial representation also requires an examination of the actual relationship: calling an agreement a ‘franchise’ does not, by itself, determine its legal classification. Ask a Lebanese lawyer to align the supply schedule with the franchise agreement and supplier agreements, particularly on liability, termination and dispute resolution.

Practical takeaway: Before granting a franchise, prepare a purchasing matrix, supplier approval records, a contingency plan and a contractual schedule clarifying pricing and responsibility. Do not impose a mandatory source without an explainable reason and a clear process for dealing with supply failures.