Who Signs the Franchise Agreement in Lebanon? Preparing the Franchisor Entity

When you decide to turn your existing business in Lebanon into a franchise model, you may start drafting the agreement before clearly answering a fundamental question: who will legally grant the franchise? The name above the shopfront is not necessarily the name of the party entitled to enter into contracts, collect fees and provide support. Getting the franchisor entity in order before negotiations helps establish clear franchise relationships and prevents gaps in authority from emerging after signing.

1. Separate the business name from the contracting party’s identity

Start with a simple map distinguishing between the business owner, the company, if any, the commercial establishment and the trade name. These terms are not interchangeable. Under Legislative Decree No. 11 of 5 August 1967, a commercial establishment comprises assets dedicated to carrying on a business activity; its existence does not make it a legal person separate from its owner.

If you operate as a sole trader, do not use the shop’s name alone to identify the franchisor. If a company runs the business, use its legal name, legal form, address and registration details, rather than naming its founder in its place. Ask a lawyer to determine the wording appropriate to your business structure.

Create a reference sheet answering four questions:

• Who operates the existing outlets and bears their liabilities?
• Who owns the assets and rights the franchisee will need?
• Who will sign the agreement, issue invoices and collect fees?
• Who will employ the training and ongoing support team?

Different answers are not necessarily a problem, but they require documented legal arrangements, not verbal understandings between partners.

2. Choose the franchisor based on its actual capacity

Setting up a new company is not automatically a requirement for granting franchises, nor is using the existing company always the best option. Compare the alternatives with a lawyer and an accountant, taking account of existing obligations, ownership arrangements, taxation and the chosen entity’s ability to fulfil the agreement.

Using the operating company may make resources and contracts directly available. A dedicated franchise company may make it easier to organise accounts and responsibilities, but it does not automatically acquire the brand, know-how, employees or contracts. Creating a new entity alone does not make it ready to act as a franchisor.

For example, if one company owns the restaurant and employs its staff while another will sign the franchise agreements, establish how the first will provide training for the second, who will bear the cost and who will be responsible for delivery. If that arrangement cannot continue, will the franchisor still be able to meet its obligations?

Also review the company’s objects and the powers of its governing bodies as set out in its documents. Do not assume that carrying on the original business activity automatically covers every proposed arrangement. Ask whether any amendments or internal resolutions are needed before presenting the agreement.

3. Assemble the authority and rights file before signing

Prepare an internal file that allows you to verify that the franchisor legally exists, that the signatory is authorised to represent it and that it can grant the promised rights. This is an entity due diligence file, not a substitute for the agreement or the documents introducing prospective franchisees to the business.

Depending on the circumstances, the file should include:

• Up-to-date commercial registration documents, constitutional documents and any amendments.
• The commercial registry statement and documents identifying authorised signatories and the limits of their authority.
• An approving resolution from the appropriate company body, where required.
• An appropriate power of attorney where a representative signs under one.
• The tax registration details needed for invoicing.
• Documents proving ownership of the rights, or licences permitting their use and the granting of usage rights to others.

Focus here on the chain of authority, rather than registering the trade mark again. If the trade mark is held in the founder’s name but the agreement is in the company’s name, verify that a legal instrument authorises the company to grant franchisees the right to use it, on terms and for a period consistent with the company’s obligations.

Apply the same checks to images, software and training materials. Paying for a design or software does not necessarily give you the right to copy it or make it available across a franchise network. Record any restriction that requires consent before making a contractual commitment.

4. Distinguish general registration from franchise regulation

Lebanon has no standalone, comprehensive franchise law, nor a general franchise-specific regime requiring franchisor registration or a standardised pre-contractual disclosure document. However, the absence of specific regulation does not exempt the parties from general rules or obligations relating to their activities.

Depending on its substance, the relationship is governed by the Code of Obligations and Contracts, the Code of Commerce and intellectual property rules. Consumer protection provisions must be observed in dealings with consumers, alongside tax requirements and relevant licensing requirements. Registration of a trader or company in the commercial register is not government approval of the franchise model or an endorsement of its commercial viability.

Legislative Decree No. 34 of 1967 on commercial representation also warrants particular review. Whether its provisions may apply to certain franchise relationships is a matter of legal and judicial debate; simply calling the document a ‘franchise agreement’ does not settle the issue. Before finalising the wording, ask for an assessment of the substance of the relationship and the consequences of its legal classification, taking account of the legislation in force.

5. Carry out a final entity check

Before signing, check that the franchisor’s name in the agreement matches its documents, invoices and payment instructions. If another entity will collect money or provide a service, document the basis for its role and explain it to the other party.

Keep a list of outstanding items, the person responsible for each document and the deadline for completing it. Do not leave proof of the signatory’s authority or the right to grant use of the assets until after fees have been collected. Repeat the checks when ownership or authorised signatories change, or when rights are transferred.

The practical takeaway: Before granting your first franchise, make sure the party making commitments, signing the agreement and collecting payments has both the legal authority and the practical capacity to deliver. Alignment between identity, authority and rights is the foundation of an enforceable agreement.