Turkey: Franchising In Turkey: A Legal Primer

Last Updated: 19 February 2019
Article by Seray Özsoy

What are the key legislations and frameworks for franchisors looking to establish their brand in Turkey?

Even though it has existed in Turkey since the mid 1980s, local franchising has experienced a dramatic growth in recent years. This has been partly driven by foreign companies: there is no restriction on them with respect to the ownership or control of a Turkish business, save in real estate.

According to recent data, there are nearly 2000 brand chains in Turkey: a third of them are foreign brands and the rest domestic. The benefits of franchising and the importance of brand loyalty have encouraged start-ups to enter into franchise agreements with local or international franchisors rather than establishing a business from the outset.

However, franchising has not yet been specifically recognised by Turkish Law and there is no statutory definition of franchise under Turkish laws.

The best available definition of its key elements was given by the Turkish Court of Appeals (TCA) in 2001: a franchise agreement is a long-term and continuous contractual relationship between two legally independent parties.

It gives the franchisee the right to market a product or service by using the franchisor's trademark, trade name or by using its operation methods (know-how), as well as the obligation to pay a royalty fee for such rights.

It also obliges the franchisor to provide know-how or licence a trademark or another IP right and to support the franchisee regarding the conducting of the business and operation of the system.

Franchise agreement

Like other jurisdictions, franchise agreements in Turkey therefore enable a franchisee to participate in a franchisor's business by using their know-how, operational systems and business model. It also gives them the right to use trademarks and logos held by the franchisor.

The legal and trade relationship between franchisor and franchisee is generally vertical and continuous until the termination of the franchise agreement.

Despite being undefined, Turkish Law provisions relevant to franchising exist in a wide body of legislation, primarily the following: The Turkish Code of Obligations numbered6098 ("TCO"), The Turkish Commercial Code numbered6102 ("TCC"), The Act on the Protection of Competition No.4054 and Intellectual Property Law numbered6769.

Although franchise agreements are a unique form of contract in Turkish law, they contain similar elements of other agreements, such as sales & purchase, agency and service agreements alongside relevant provisions of the TCO and TCC which can also be applied to termination, notice periods, compensation and non-compete clauses, among other areas.

Where they differ from other comparable agreements is in the use of know-how, operation systems and trademarks. A franchise agreement often addresses, or is subject to, Turkish competition and intellectual property laws.

A principal feature is the use of intellectual property rights which makes them subject to licensing requirements, registration, and infringement considerations.

Contract law

For the most part, franchise agreements are invariably governed by the general principles of Turkish contract law. A Turkish franchising contract shares the legal characteristics of a mutual, continuous and framework contract.

The basic principles underpinning it include the following: sustainability of the brand, ensuring the same quality, increasing the demand and brand recognition, preventing competition among brands, and gaining mutual benefit.

More specifically, the franchisor is obliged to give the franchisee authorisation to sell goods or services by using non-material rights such as a trademark, company name and know-how, and to integrate the franchisee into the franchise network and support their commercial activities based on this system.

In return, the franchisee is obliged to increase the sales of the goods or services on its own behalf by using the non-material rights and acting in accordance with the franchisor's instructions.

Franchising can be categorised into two principal types: either business format or product distribution by licensing trademark.

Business format franchising enables the franchisee to use the franchisor's products, services, trademarks, system and know-how, whereas product distribution allows the franchisor to license its trademark and logo and provide its products to the franchisee.

The franchisee can then sell and distribute those products under the given trademark licence. Typically, the franchisor does not provide the franchisee with a system to operate its business.

Business systems

So what other key elements of Turkish franchise agreements are relevant? The Franchisee's independence from the franchisor, manifested by their ability to act on their own behalf and for their own account, is critical.

The agreement may be drafted for a definite or an indefinite term, although it is typically long term rather than temporary.

Such agreements are further characterised by know-how utilisation of the franchisor's business systems (production, operation and marketing) and integration of their products and services.

The franchisor's trademarks and logos must be applied uniformly as part of the agreement by the franchisee, who pays a royalty fee in return and is obliged to increase sales.

Termination of a franchise agreement depends upon its terms. If it was agreed for an indefinite term, it can be terminated by giving a reasonable notice period or because of a just cause, i.e. the franchisee's breach of contract and failure to remedy.

TCC provisions on the termination of agency agreements are often applied to franchise agreements with a common notice period of three months.

Franchise agreements with a definite term automatically terminate on the expiry of the contractual term, unless the parties agree to an automatic renewal.

If one party terminates the agreement without a just cause, the other party may seek compensation for tangible damages – loss of profit, return of products in stock, etc – or intangible damages, e.g. loss of commercial reputation.

Due to the fact that they are not governed by specific legislation but by myriad laws and the interpretation of how disputes arising from franchise agreements are decided, it is generally prudent to seek legal advice at the outset of an agreement before it is signed in order to achieve clarity and certainty at the outset.

This article was published by Global Franchise

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Pehlivan & Guner Hukuk Burosu
Kolcuoglu Demirkan Kocakli Attorneys at Law
Ketenci & Ketenci Hukuk
Yurdakul International Legal Consultancy
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Pehlivan & Guner Hukuk Burosu
Kolcuoglu Demirkan Kocakli Attorneys at Law
Ketenci & Ketenci Hukuk
Yurdakul International Legal Consultancy
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions