Franchise and
Distribution

Before a franchise or distribution system is set up, the legal feasibility of the trademark, product, service, target territory, investment model and supply system is assessed. The aim is to align the structure written in the agreement with the actual way the business model operates.

• Comparing franchise, master franchise, area development, multi-unit franchise and sub-franchise models
• Distinguishing sole distributorship, exclusive distributorship, selective distribution, dealership, agency and commission relationships
• Reviewing the trademark, business system, supply, technology and revenue model
• Establishing the company and group structure
• A local agreement and compliance model for foreign brands entering Türkiye
• A country- and region-based agreement architecture for brands expanding abroad from Türkiye
• Pilot operation, preliminary protocol, letter of intent and development schedule
• Coordinating the tax, customs, intellectual property and competition law issues

In a franchise relationship, the investment decision should not be made without seeing the registration status of the trademark, the history of the system, the fees, the estimated investment, the location, supply dependency, competition restrictions and exit conditions. The information given by the franchisor and the franchisee’s own commercial research should complement each other.

• Legal due diligence on the franchisor or trademark owner
• Searching the trademark, domain name, company, lawsuit, attachment and bankruptcy records
• Preparing the franchise information package and pre-contractual disclosure documents
• Contractual analysis of the investment budget, entry fee, royalty, advertising and technology fees
• Reviewing the location, lease, exclusivity and territory protection
• The basis of turnover or profitability projections and liability risks
• Supplier dependency, mandatory purchasing and stock risks
• Assessing the term of the agreement, renewal, assignment and exit conditions

Where pre-contractual information and projections are untrue, incomplete or misleading, depending on the circumstances of the specific case this may lead to discussions of pre-contractual liability, mistake, fraudulent misrepresentation, damages or termination of the agreement.

Türkiye has no special franchise law that prescribes a uniform pre-contractual disclosure document or a general waiting period for all franchise agreements. This does not remove the obligation to provide information in accordance with the principle of good faith and to avoid misleading statements. A turnover forecast should not be presented as an achieved result or as a guarantee of earnings.

A franchise agreement is a long-term commercial relationship that governs the permission to use the trademark and the transfer of the business system, and under which the franchisee operates subject to specified standards, fees and audit mechanisms.

The main subjects we address in a franchise agreement:

• The subject and scope of the agreement and the parties’ status as independent merchants
• Use of the trademark, trade name, logo, design, copyright and domain name
• Know-how, the business system, the operations manual and updates
• Franchise entry fee, royalty, advertising fund and other payments
• Opening investment, decoration, equipment, software and location approval
• Training, setup, opening and ongoing operational support
• Product and service standards, quality control and audit
• Supply sources, approved suppliers and purchasing terms
• Territory, customers, targets, development schedule and performance criteria
• Use of online sales, marketplaces, delivery platforms and social media
• Advertising, campaigns, loyalty programs and customer communication
• Confidentiality, trade secrets, non-compete and employees’ obligations
• Term, renewal, assignment, change of control, termination and post-termination steps
• Governing law, courts, mediation and arbitration

Provisions prepared in advance may be subject to review as general terms and conditions under Arts. 20–25 of the Turkish Code of Obligations (TBK). A clause stating “All provisions were negotiated” does not by itself remove this review. The order of precedence among the agreement, the manual and the annexes is determined.

Under the master franchise model, the authority to develop the system, grant sub-franchises and manage the system may be granted for a country or a wide region. This structure involves broader investment, audit and reporting obligations than a standard franchise agreement.

• Country or region development plan
• Minimum number of outlets to be opened and the schedule
• Authority to grant sub-franchises and the approval system
• Allocation of rights among the main trademark owner, the master franchisee and the sub-franchisee
• The sub-franchise agreement standard and direct intervention rights
• Allocation of the entry fee, revenue sharing, royalty and advertising contribution
• Localization, product adaptation and the supply chain
• Performance shortfall, territory reduction, taking back, and step-in and takeover rights
• The effect of the end of the main agreement on the sub-agreements

A distributor or dealer, as a rule, buys the products in its own name and for its own account, resells them and bears the commercial risk. The scope of the relationship with the manufacturer or supplier should be clarified through the provisions on territory, customers, sales channel, stock, delivery, warranty and after-sales service.

• Exclusive and non-exclusive distributorship agreements
• Sole distributorship and dealership agreements
• Selective distribution systems and authorized dealer criteria
• Determining the territory, customer group and sales channel
• Minimum purchase, sales target and forecast obligations
• Order, acceptance, delivery, title and passing of risk
• Price, discount, rebate, bonus and payment terms
• Stock level, slow-moving products, returns and buy-back arrangements
• Warranty, after-sales service, spare parts and product recall
• Conditions for appointing a sub-dealer or reseller
• Reporting, audit and sharing of sales data
• Term, renewal, termination and stock management after termination

Mischaracterizing the relationship between the parties may lead to different results in terms of remuneration, tax, competition, termination and equalization claims.

In the legal review, these questions

• In whose name and for whose account the transaction is made
• Who bears the ownership and stock risk
• Who manages the price and the customer relationship
• Whether the party is an independent merchant or an intermediary
• Whether there is continuing authority to negotiate or conclude contracts
• Whether the remuneration takes the form of commission, profit margin or royalty
• The degree of attachment to the trademark and the business system

are assessed together. If the title of the agreement differs from the actual practice, the court may determine the legal consequence according to the true nature of the relationship.

At the center of a franchise and distribution system there is often the trademark, business knowledge, recipe, method, software, design, content and customer experience. Who owns these assets, within what scope they may be used and what will happen when the agreement ends should be regulated clearly.

• Reviewing trademark registration and the right of use
• Preparing licenses for the trademark and other intellectual property
• Legal protection of know-how and the operations manual
• Trade secret inventory and access authorizations
• Confidentiality and information security agreements
• Software, POS, mobile application and database licenses
• Use of the domain name, social media accounts and digital assets
• Applications concerning counterfeit products, parallel trade, trademark infringement and unfair competition
• Ceasing use of the trademark and de-branding when the agreement ends

Know-how is the technical and commercial body of knowledge specific to the business. The licensor’s ownership and sublicensing authority are checked together with the limits on country, product, channel and term. Trademark registration does not replace the rights of third parties or sector-specific permits.

The operations manual defines the day-to-day practice of the franchise system; however, leaving the basic financial and legal obligations that should be in the agreement to the manual unilaterally can create disputes.

• Preparing the operations manual in line with the agreement
• The procedure for amending and updating the manual
• Standards for products, services, appearance, hygiene, personnel and customer experience
• Audit, mystery shopper and corrective plans
• The conditions under which audit findings turn into sanctions
• Training, certification and employee standards
• Crisis, product recall and business continuity procedures
• Adaptation to local legislation and approvals for deviations from the standard

The success of a franchise investment often depends on the legal and technical condition of the real property. The master lease and the franchise agreement need to be consistent in terms of term, termination, purpose of use and trademark standards.

• Legal review of the location and restrictions on use
• Lease, sublease, usage and turnover-rent agreements
• The franchisor’s approval of the location and its limit of responsibility
• Zoning, permits, signage, fire, health and business licenses
• Decoration, interior design, construction and equipment agreements
• Opening conditions, delay and cost overruns
• The effect of the end of the lease on the franchise relationship
• Assignment of the lease on termination, step-in and takeover rights, and temporary management of the business

The calculation, due date, tax treatment, audit, refund and fate of all payments within the franchise system when the agreement ends should be clearly regulated.

• Initial or franchise entry fee
• Turnover-based or fixed royalty
• Advertising and marketing fund contributions
• Technology, software, training and renewal fees
• The relationship between minimum payments and the sales target
• Definitions of gross sales, net sales, discounts, returns and taxes
• The right to inspect records and to conduct financial audits
• Default interest, security, contractual penalty and set-off
• Reviewing foreign currency payments, exchange rate risk and payment restrictions
• Coordinating withholding tax, VAT, transfer pricing and cross-border payments

Financial calculations and tax reports are prepared by the relevant financial experts; the contractual structure and legal disputes are assessed by an attorney.

Royalty refers to the ongoing fee for use and support specified in the agreement. For payments in foreign currency, the residency of the parties, the type of transaction and the restrictions in force are reviewed separately; it is not assumed that every franchise fee can be freely agreed in foreign currency.

Mandatory supply can protect product standards; however, it should be regulated in a balanced way in terms of price, access, dependency and competition law.

• Determining the mandatory products and services
• Selecting approved suppliers and the approval process for new suppliers
• Transparency of supplier revenues, discounts and contributions
• Quality, delivery, continuity and alternative supply
• Allocation system in case of a shortage of raw materials or products
• Purchase price changes and the adjustment mechanism
• Product defects, warranty, recall and sharing of liability
• Supply chain audit, sustainability and ethics rules

Franchise, dealership and distribution systems should be reviewed under Law No. 4054 on the Protection of Competition and the rules on vertical agreements. Whether an agreement benefits from the block exemption depends not only on its title but on market shares, the nature and duration of the restriction and the actual practice.

The main risk areas:

• Direct or indirect determination of the resale price
• Turning a recommended or maximum price into a de facto fixed or minimum price
• Unlawful restriction of active and passive sales
• Allocation of territories and customers
• Prohibiting or neutralizing internet and marketplace sales
• Exclusive purchasing and non-compete obligations
• Tying, bundling and mandatory supply
• Discriminatory application of selective distribution criteria
• Sharing of commercially sensitive information and hub-and-spoke risks
• Dominant position, exclusionary rebates and de facto exclusivity
• Competing brands, non-solicitation of employees and post-sale restrictions

Not only the provisions of the agreement but also emails, messages, price monitoring systems, bonus mechanisms and field practice may also be subject to a competition law review.

In the block exemption review under Communiqué No. 2002/2, the applicable 30% market share threshold is assessed according to the relevant market and the role of the party; for an exclusive supply obligation, the buyer’s market is also important. Exceeding the threshold or being unable to benefit from the block exemption does not mean that every agreement is unlawful in itself; a separate review is needed under Arts. 4–5 of Law No. 4054.

Territory and exclusivity provisions that protect the investment of a franchisee or distributor should be structured consistently with the trademark owner’s growth plan and the competition rules.

• Defining the exclusive territory and customer group
• The main trademark owner’s direct, online or corporate sales rights
• The effects of new stores, kiosks, delivery areas and alternative channels
• Reflecting the distinction between active and passive sales in the agreement
• Narrowing or removal of exclusivity if the sales target is not met
• Non-competition during the term of the agreement
• Reviewing post-contractual non-compete conditions as to term, place and subject matter
• Provisions on non-solicitation of employees, customers and suppliers

For a post-contractual non-compete obligation in vertical agreements to benefit from the block exemption, in addition to not exceeding one year, the conditions concerning the relevant goods or services, the premises or land from which the activity is carried out and the protection of the transferred know-how must be met together. Restrictions necessary for the common identity of the franchise system and other exceptions are examined separately. In agency, the written form, the maximum of two years, the scope and the appropriate compensation arrangement under TTK Art. 123 are different; they cannot be carried over unchanged to every franchise agreement.

Franchise and distribution systems have to manage physical stores, the brand website, the mobile application, marketplaces, social media and rapid delivery platforms together.

• The franchisee’s or distributor’s right to sell over the internet
• Use of the brand’s domain name and the central e-commerce site
• Marketplace and third-party platform conditions
• Routing online orders to stores and revenue sharing
• Digital advertising, keywords and social media accounts
• Online price, campaign and coupon practices
• Distance contracts, pre-contractual information, withdrawal and consumer procedures
• Obligations concerning the Electronic Commerce Information System (ETBİS), commercial electronic messages and the Message Management System (İYS)
• Competition law review of restrictions on online sales

Sales over the internet may, as a rule, qualify as passive sales; active targeting of specific territories and the permitted restrictions are assessed separately. Quality standards are not the same as conditions that effectively prevent internet sales. The validity of a marketplace restriction is not accepted solely because it is written in the agreement.

It should be determined in what capacity customer data is processed among the franchisor, the franchisee, the distributor, the dealer and the platform. General statements such as data ownership do not remove the obligations relating to the protection of personal data.

• Determining the roles of data controller and data processor
• Privacy notices for customers, employees and prospective investors
• CRM, loyalty program, mobile application and call center processes
• Data sharing and data processing agreements
• Commercial electronic messages and marketing consents
• Transfers of data abroad and multinational system access
• POS, camera, Wi-Fi, location and cookie data
• Data breaches, cyber incidents and data processing when the agreement ends

CRM is a customer relationship management system. The roles of data controller and data processor are determined on the basis of the actual activity. Transfer processes, including remote access by a center abroad, are reviewed under the current transfer mechanisms in KVKK Art. 9; merely adding a general consent clause to the agreement is not considered sufficient.

In a franchise or distribution system, liability arising from goods and services offered to consumers cannot always be eliminated, as against the consumer, by an agreement between the parties themselves.

• Legal review of advertising, promotions, discounts and price announcements
• Consumer contracts, withdrawal, defective goods and defective services processes
• Warranty certificate, after-sales service and spare parts obligations
• Product safety, traceability and recall procedures
• Special compliance in food, cosmetics, health, automotive and other regulated sectors
• Consumer complaints, arbitration committee and litigation processes
• Sharing of liability among the franchisor, manufacturer, importer, distributor and seller
• Crisis communication and legal protection of brand reputation

In long-term commercial relationships, not every breach should be provided for directly as a ground for termination. Depending on the nature of the breach, notice, a cure period, a remediation plan, interim measures and termination options can be set up in stages.

• Sales, store opening and market development targets
• Financial, operational and brand standard audits
• Notice of deficiency and a reasonable cure period
• Defining repeated or serious breaches
• Support plan, training and interim operating measures
• Security, contractual penalty and compensation for loss
• Suspension of the agreement, reduction of the territory or removal of exclusivity
• The evidentiary and confidential nature of audit reports

A franchisee’s or distributor’s transfer of its business, a change in shareholding or a restructuring within the corporate group may affect the agreement and the trademark system.

• Renewal conditions and transition to a new agreement
• Prior approval for assignment and candidate evaluation criteria
• Share transfer and direct or indirect change of control
• Scenarios of death, incapacity, bankruptcy and change of management
• Pre-emption, buy-back and purchase options
• The transfer price and the franchisor’s fee claims
• Training and suitability conditions for the new operator
• Assignment of security, permits and the lease

Termination is not a transaction completed merely by sending a notice. A closing plan should be prepared for the business, stock, trademark, data, personnel, lease, digital accounts and ongoing customer relationships.

• Reviewing the conditions for termination for cause and ordinary termination
• Formal notice, cure period and termination notices
• Risks of wrongful termination, early termination and damages
• Removal of the trademark, signage, uniforms and corporate appearance
• Return or destruction of the operations manual, trade secrets and documents
• Assignment of the domain name, telephone, social media, platform account and digital assets
• Sale, return, buy-back or liquidation of stock
• Lawful closing of customer data and loyalty program records
• Enforcement of non-compete, confidentiality and non-solicitation obligations
• Concluding the lease, employee, supplier and consumer relationships

It is not assumed that the lease, employment relationships and obligations toward consumers end at the same time as the termination date. In the closing or assignment protocol, the persons responsible and the dates are determined for the last sale, the stock count, the release of security and the handover of digital accounts.

The equalization claim in the Turkish Commercial Code is regulated primarily for agency. However, where the statutory conditions are met and equity so requires, its application may also be argued in sole distributorship and similar continuing contractual relationships that grant a monopoly right. It cannot be said that every distributor or franchisee has an automatic right to equalization.

The main claims assessed:

• Equalization or customer portfolio compensation
• Wrongful termination and loss from early termination
• Investment and unamortized expenses
• Loss of profit and lost earnings
• Contractual penalty and the cashing of security
• Stock, equipment and decoration costs
• Compensation for trademark infringement and unfair competition
• Unpaid royalty, product price and commercial receivables

The legal basis of the claim, the nature of the agreement, the parties’ contribution, the continuing benefit of the customer portfolio, the reason for termination and the state of the evidence are examined together.

TTK Art. 122 requires, together, a significant continuing benefit from new customers, loss of remuneration and the conditions of equity. The reason for termination and the exceptions in the statute are examined. The equalization claim cannot be waived in advance; where it can apply, the claim must be asserted within one year. This period is not a common time limit for bringing an action that covers all termination and loss claims.

The use of a standard agreement does not mean that every provision will bind the other party. Under Arts. 20–25 of the TBK, information, review of content, interpretation of unclear provisions and unilateral amendment clauses are examined.

• Resolving conflicts among the agreement, the annexes and the operations manual
• The amendment procedure for new fees, mandatory investment and renewal conditions
• Force majeure, supply disruption, extraordinary cost increases and allocation of risk
• Excessive difficulty of performance and adjustment options under the conditions of TBK Art. 138
• Validity of contractual penalty, limitation of liability, waiver and release provisions

An increase in exchange rates or costs alone does not give the authority to change the agreement or to withhold payment. Adjustment conditions, foreseeability, the assumption of the risk in the agreement and the state of performance are assessed together.

Franchise and distribution relationships may give rise to receivables for the entry fee, royalty, advertising contribution, product price, bonuses, rebate refunds, contractual penalty and damages.

• Reconciliation of receivables and debts
• Reviewing invoices, current accounts, orders and delivery documents
• Letters of guarantee, suretyship, pledges and guarantee agreements
• Formal notice, payment plan and restructuring negotiations
• Precautionary attachment and interim injunction
• Enforcement proceedings, actions for annulment of objection and receivable actions
• Contractual penalty, interest, exchange rate difference and damages claims
• Bankruptcy, composition with creditors (konkordato) and the position of the agreement in a financial crisis

A bank letter of guarantee, suretyship and an independent guarantee are not the same type of security. Form, authority, amount, term, conditions of demand and the return of the security are checked separately. It cannot be guaranteed that a measure stopping payment under the security will be granted or that a commercial receivable will necessarily be collected.

In a dispute, in addition to the agreement, the parties’ actual practice, emails and messages, price lists, audit reports, sales records, payment documents, advertising content and customer data are examined.

The main disputes we handle:

• Formation, validity and interpretation of the agreement
• Incomplete or misleading pre-contractual information
• Territory violations and exclusivity disputes
• Sales target and performance breaches
• Royalty, advertising fund, product price and commercial receivables
• Violations concerning the trademark, know-how, trade secrets and unfair competition
• Mandatory supply, stock, quality and product liability
• Internet sales, marketplaces and pricing practices
• Termination, non-renewal and assignment disputes
• Equalization, investment loss, contractual penalty and damages claims
• Interim injunction, precautionary attachment and preservation of evidence
• Mediation as a condition precedent to litigation, commercial litigation and arbitration

Depending on the nature of the claim, different courts with subject-matter jurisdiction may come into play, such as the commercial court of first instance or the intellectual and industrial property rights court. A valid arbitration clause, the court’s territorial jurisdiction and mediation as a condition precedent to litigation are checked together. Instead of collecting data through unlawful access, the integrity of existing records is preserved.

A dispute strategy depends not only on the content of the formal notice but on its being sent at the right time and by an appropriate means. For default, termination and withdrawal notices between merchants, the methods under TTK Art. 18/3 are assessed together with the address, service and cure provisions in the agreement.

• Reviewing the notary, registered letter, telegram or Registered Electronic Mail (KEP) arrangement with a secure electronic signature
• Placing the dates for automatic renewal, notice, cure, objection and assertion of rights on a separate calendar
• Checking mediation under TTK Art. 5/A in actions for commercial receivables, damages, annulment of objection, negative declaratory judgment and recovery of payment where the subject is money
• Assessing Art. 18/A/18 of Law No. 6325 as to the arbitration agreement and special procedures
• Where the conditions are met, an interim injunction, precautionary attachment and preservation of evidence, and following up the steps that complement them

It cannot be said that every email is invalid or that every message replaces the notice required by law; proof and the notice procedure are examined separately. The need for urgent protection is assessed independently of the schedule for meetings and settlement.

Written or oral practices in distribution systems concerning price, territory, customers, internet sales and the sharing of commercial information may be subject to a review by the Competition Authority (Rekabet Kurumu).

• Competition law review of franchise and distribution agreements
• Compliance rules for sales, marketing, pricing and field teams
• Reviewing resale price and campaign communications
• Dealer meetings, WhatsApp groups, reporting and price monitoring systems
• Preparation for on-site inspections and a document retention policy
• Preliminary inquiry, investigation, requests for information and defense processes
• Commitment, settlement, negative clearance and exemption assessments
• Administrative court proceedings against decisions of the Competition Board (Rekabet Kurulu)

Commitment and settlement are different procedures. Commitment is not a general solution for clear and serious violations; the acceptance, timing and judicial review consequences of a settlement are assessed separately. During an on-site inspection, deleting evidence or blocking access is not recommended; obligations and defense rights are considered together.

In cross-border agreements, preparing the text only in a foreign language is not sufficient. The governing law, mandatory local rules, trademark protection, tax, customs, money transfer, competition law and enforcement of the decision should be assessed together.

• Entry model for foreign brands into Türkiye
• Franchise and distribution system of Turkish brands abroad
• Master franchise, country development and regional distributorship
• Bilingual and multilingual agreements
• Choice of law, jurisdiction, seat of arbitration and language of proceedings
• International sale of goods and delivery terms
• Import, export, customs, product registration and technical legislation
• Tax and transfer pricing on royalty and license payments
• Sanctions, export controls, anti-bribery and anti-money laundering
• Recognition, enforcement and execution of foreign court and arbitral decisions

Choosing foreign law does not remove the overriding mandatory rules that must be applied in Türkiye or the local obligations as a whole. Matters that require a local legal opinion or representation in a foreign country are planned in coordination with the authorized legal professionals in that country.

It is not appropriate to use the same agreement for every sector. Licenses, consumer protection, product safety, advertising and professional regulations may differ by sector.

• Food and beverage, restaurants, cafes and food retail
• Hotels, tourism, accommodation and service businesses
• Education, courses and children’s services
• Health, clinics, medical devices and cosmetics
• Automotive, fuel, spare parts and service systems
• Technology, software and electronic products
• Fashion, retail, furniture and fast-moving consumer goods
• Real estate, brokerage and intermediary services
• Sports, fitness and personal care
• E-commerce and platform-based business models

Permission to use a trademark alone does not grant authority to operate in health, education, tourism or other regulated fields. Whether a franchise or distribution model can be applied in a sector is assessed through licenses and professional rules. Technical conformity and financial reporting remain within the area of the relevant experts.