Franchise Agreements in Turkey: Trademark Licensing, Fees, Competition Rules and Termination Risks

Introduction

Franchising allows an international brand owner to expand in Turkey by authorizing a local business to operate under the franchisor's trademark, commercial system, operational standards and know-how.

The franchisee may be granted the right to:

• Open one or more branded locations,
• Use trademarks and logos,
• Apply the franchisor's operating system,
• Purchase approved products
• Receive training,
• Access recipes, manuals or software,
• Benefit from national or international marketing,
• Operate within an exclusive or protected territory.

In return, the franchisee may pay:

• An initial franchise fee,
• Continuing royalties,
• Marketing contributions,
• Technology fees,
• Training fees,
• Product supply charges,
• Store-opening or renewal fees.

Turkey does not have one comprehensive statute regulating every aspect of franchising. A franchise relationship is instead assessed through several legal areas, including the Turkish Code of Obligations, the Turkish Commercial Code, the Industrial Property Code, competition law, tax law, consumer law and sector-specific regulation.

This makes contract drafting particularly important.

A poorly prepared agreement may leave the parties in dispute over:

• Ownership of the Turkish trademark,
• Validity of the license,
• Exclusive territory,
• Mandatory suppliers,
• Resale prices,
• Online delivery platforms,
• Renewal,
• Termination,
• Unsold inventory,
• Customer data,
• Post-term competition restrictions,
• Compensation for investments.

The fact that a contract uses an international franchise template does not mean that every provision is enforceable in Turkey.

What Is a Franchise Agreement?

A franchise agreement is generally a continuing commercial relationship under which the franchisor permits the franchisee to operate a business using a coordinated business model.

The franchise package commonly includes:

• Trademark license,
• Trade dress and store design,
• Business methods,
• Confidential know-how,
• Operational manuals,
• Training,
• Product or supplier standards,
• Advertising system,
• Quality-control procedures,
• Continuing commercial support.

The franchisee usually remains a legally independent business.

The franchisee is not automatically:

• An employee of the franchisor,
• A branch of the franchisor,
• A commercial agent,
• A subsidiary,
• A partner in a legal partnership.

However, the real structure of the relationship matters more than the label used in the agreement.

If the franchisor exercises excessive control over employment, pricing, customer contracts and daily operations, third parties may argue that the franchisee lacks genuine commercial independence.

Franchise, Distribution and Agency Relationships

A franchise relationship may contain elements of several contract types.

Franchise

The franchisee operates under a common brand and business system and receives continuing know-how and assistance.

Distribution

The distributor purchases products and resells them in its own name and at its own risk.

Commercial agency

The agent negotiates or concludes transactions for the principal and commonly receives commission.

Trademark license

The licensee receives permission to use a registered trademark within an agreed scope.

Many franchise agreements combine all four elements.

For example, a restaurant franchisee may:

• Use the franchisor's trademark,
• Follow its recipes and service system,
• Purchase approved products
• Sell ​​directly to customers,
• Pay a percentage royalty.

The legal analysis should therefore examine each contractual component rather than treating the agreement as one indivisible concept.

Can a Foreign Franchisor Grant a Franchise in Turkey?

Yes.

A foreign company may grant franchise rights to a Turkish individual or company without establishing a Turkish subsidiary in every case.

The foreign franchisor should nevertheless review whether its activities create:

• A Turkish permanent establishment,
• Tax registration obligations,
• A branch-registration requirement,
• Employment or work permit issues,
• Product-import responsibilities,
• Sector licenses,
• Data protection obligations.

A foreign franchisor that maintains personnel, premises, inventory or management functions in Turkey may face a different legal and tax position from a franchisor that only licenses its brand and provides support from abroad.

Due Diligence on the Franchisee

The franchisor should investigate the proposed Turkish franchisee before granting brand rights.

The investigation should include:

• Trade registry records,
• Shareholding structure,
• Ultimate beneficial owners,
• Managers and signing authority,
• Paid-up capital,
• Tax and social security position,
• Existing litigation,
• Enforcement proceedings,
• Concordat or bankruptcy risk,
• Sector experience,
• Financial resources.

Where the franchisee is a newly established company, the franchisor may consider obtaining:

• Shareholder guarantee,
• Parent company guarantee,
• Bank guarantee,
• Security deposit,
• Letter of credit,
• Mortgage or pledge where appropriate.

A newly incorporated limited company may have insufficient assets to cover unpaid fees, store closure expenses or trademark damage.

Due Diligence on the Franchisor

The franchisee should also investigate the franchisor.

The franchisee should verify:

• Ownership of the trademark,
• Turkish trademark registration,
• Pending cancellation or opposition proceedings,
• Authority to grant sub-franchises,
• Existing Turkish franchise network,
• Litigation history,
• Accuracy of turnover claims,
• Required initial investment,
• Supply-chain capacity,
• Previous location closures.

The franchisee should not rely only on:

• Promotional presentations,
• Social media popularity,
• Verbal revenue promises,
• International brand recognition.

The legal owner of the trademark may be different from the company signing the franchise agreement.

Pre-Contractual Disclosure

Turkey does not currently use one general franchise-specific disclosure document equivalent to the mandatory disclosure forms found in some other jurisdictions.

This does not permit the franchisor to provide false, incomplete or misleading information.

Before signing, the franchisor should accurately disclose material information concerning matters such as:

• Required investment,
• Fees,
• Territory,
• Supply requirements,
• License duration,
• Renewal conditions,
• Expected opening timetable,
• Existing competing locations,
• Material litigation,
• Known regulatory obstacles.

General Turkish contract principles concerning good faith, contractual formation, error, deception and damages may become relevant where one party enters the agreement on the basis of materially false information.

A franchisor should be particularly cautious when presenting:

• Estimated revenue,
• Break-even period,
• Profit margin,
• Customer traffic,
• Expected store value.

Financial performance information should explain:

• Whether figures are historical or projected,
• Whether they are gross or net,
• Which locations were used?
• Whether rent, tax, labor and finance costs are included.

Business Plan and Profit Guarantees

A business plan is not necessarily a legal guarantee of profit.

The agreement should distinguish between:

• Historical information,
• Non-binding projection,
• Contractual guarantee,
• Minimum performance commitment.

The franchisor should not describe uncertain projections as guaranteed financial outcomes.

The franchisee should prepare an independent budget covering:

• Rent,
• Deposit,
• Construction,
• Equipment,
• License fees,
• Royalties,
• Marketing,
• Employees,
• Working capital,
• Tax,
• Currency exposure.

A well-known brand does not eliminate ordinary business risk.

The Trademark Must Be Protected in Turkey

A foreign trademark registration does not automatically provide full national protection in Turkey.

Before launching the franchise, the franchisor should confirm that the relevant marks are protected through:

• Turkish national registration, or
• An international registration designing Turkey.

Protection should cover the goods and services used in the franchise.

Depending on the business, registrations may be needed for:

• Restaurant services,
• Retail services,
• Food products,
• Clothing,
• Software,
• Education,
• Accommodation,
• Cosmetics.

The franchisor should also search for:

• Conflicting Turkish registrations,
• Similar trade names,
• Domain names,
• Social media accounts,
• Local language variations.

Trademark License

A registered trademark may be licensed for all or part of the goods and services for which it is registered.

Turkish law recognizes:

• Exclusive licenses,
• Non-exclusive licenses.

Unless the agreement states otherwise, the license is treated as non-exclusive.

Under an exclusive licence, the trademark owner cannot ordinarily grant another license and cannot use the mark itself unless the right to do so has been expressly reserved.

The franchise agreement should therefore state clearly:

• Whether the license is exclusive,
• Territory,
• Locations,
• Products and services,
• Sales channels,
• Duration,
• Right to sub-license,
• Franchisor's reserved use
• Affiliate use,
• Online use.

Recording the Licence

A trademark license may be recorded in the Turkish trademark register.

Recordation is particularly important where the parties want the license to be effective against good-faith third parties and where exclusive rights may need to be demonstrated in infringement proceedings.

The application may require:

• License agreement or extract,
• Identification of the trademark,
• Parties' information,
• Turkish translation,
• Applicable registration fee.

Foreign documents may require authentication and translation depending on their form. Turkish industrial property legislation permits legal transactions concerning registered rights to be recorded and limits their enforceability against good-faith third parties if they are not recorded.

Who Owns Turkish Adaptations?

The agreement should regulate ownership of locally developed materials such as:

• Turkish slogans,
• Translated manuals,
• Local advertising,
• Menu adaptations,
• Product photographs,
• Software modifications,
• Store design plans,
• Social media content.

Without a clear clause, the parties may dispute whether local intellectual property belongs to:

• Franchisor,
• Franchisee,
• Marketing agency,
• Software developer,
• Architect.

The contract should include appropriate assignments or licenses for copyright, trademark, design and database rights.

Domain Names and Social-Media Accounts

The agreement should state:

• Who registers the domain?
• Who controls passwords?
• Who owns social-media accounts,
• Whether the franchisee may use the brand in usernames,
• What happens after termination.

A franchisee should not register the franchisor's trademark in its own name without written permission.

After termination, the franchisee may be required to transfer:

• Domain names,
• Social media accounts,
• Telephone numbers,
• Online delivery-platform accounts,
• Local advertising pages.

The transfer mechanism should be planned at the beginning of the relationship rather than after conflict begins.

Know-How and Operations Manual

A franchise system normally includes confidential operational knowledge.

Know-how may concern:

• Recipes,
• Service techniques,
• Store layout,
• Procurement,
• Pricing methodology,
• Customer experience,
• Software,
• Marketing,
• Training.

The agreement should identify:

• Which information is confidential,
• How it may be used,
• Who may access it?
• Security measures,
• Return and deletion obligations,
• Duration of confidentiality.

Information that is public, obvious or already known independently may not receive the same protection as genuinely confidential know-how.

Franchise Fees

The financial structure should be stated clearly.

Initial franchise fee

A one-time amount paid for entry into the system, initial training, license rights or opening assistance.

Continuing royalty

A periodic fee commonly calculated as:

• Percentage of gross sales,
• Fixed monthly amount,
• Greater of percentage or minimum fee.

Marketing contribution

A payment to a national or regional advertising fund.

Technology fee

A fee for software, ordering systems, applications or support.

Renewal fee

A payment connected with extending the agreement.

Transfer fee

A fee payable if the franchisee sells the business or transfers control.

Each payment should be linked to a defined legal and commercial service.

Gross Sales Definition

Where royalties are calculated on gross sales, the contract should define what is included.

Questions may arise over:

• WATT,
• Discounts,
• Returns,
• Cancelled orders,
• Delivery charges,
• Marketplace commissions,
• Gift cards,
• Employee meals,
• Complementary products,
• Insurance proceeds,
• Intercompany sales.

A vague gross-sales definition can create substantial audit disputes.

The agreement should also state:

• Reporting period,
• Payment date,
• Currency,
• Exchange rate,
• Late interest,
• Audit rights.

Taxes on Franchise and Royalty Payments

Payments by a Turkish franchisee to a foreign franchisor may include both:

• Intellectual property royalties,
• Commercial or technical services.

Their Turkish tax treatment depends on the real nature of each payment.

Under Turkish domestic rules, payments to a foreign company for the use or transfer of trademarks and similar intangible rights may be subject to corporate withholding tax at the domestic rate. An applicable double taxation treaty may reduce that rate where the foreign recipient is the beneficial owner and provides the required tax-residency documentation.

Services or rights supplied from abroad but used or benefited from in Turkey may also create Turkish VAT responsibility for the Turkish recipient through the reverse-charge mechanism.

The agreement should state whether fees are:

• Gross or net of holding tax,
• Inclusive or exclusive of VAT,
• Subject to gross-up,
• Split between license and services.

The parties should not artificially describe every payment as a service fee or royalty merely to obtain a preferred tax result.

Currency and Exchange Rate Risk

International franchise fees may be stated in:

• Euro,
• US dollar,
• British pound,
• Turkish lira.

The contract should specify:

• Payment currency,
• Exchange-rate source,
• Conversion date,
• Bank charges,
• Transfer restrictions,
• Late-payment interest.

The parties should also examine whether current Turkish foreign-exchange regulations permit the selected currency structure for the relevant agreement and parties.

Marketing Fund

A marketing fund should be administered transparently.

The agreement should state:

• Contribution rate,
• Permitted expenditure,
• Local and national campaigns,
• Administrative costs,
• Reporting,
• Unused balances,
• Whether spending must benefit each location equally.

The franchisee should not assume that every contribution will be spent specifically in its own city.

The franchisor should avoid treating the fund as unrestricted revenue unrelated to brand marketing.

Approved Suppliers

A franchisor may require the franchisee to purchase:

• Branded products,
• Ingredients,
• Equipment,
• Packaging,
• Uniforms,
• Software,
• Services

from approved sources.

Supplier restrictions may be justified by:

• Product quality,
• Brand consistency,
• Safety,
• Traceability,
• Confidential know-how.

However, they should also be assessed under competition law, particularly where the franchisor or an affiliate earns significant margins from compulsive supply arrangements.

The contract should address:

• Supplier approval criteria,
• Alternative supplier requests,
• Price changes,
• Supply shortages,
• Rebates,
• Product substitutions,
• Freight.

Competition Law Applies to Franchise Agreements

Franchise agreements are commonly treated as vertical agreements because the franchisor and franchisee operate at different levels of the supply or service chain.

Article 4 of Law No. 4054 prohibits agreements that restrict competition by object or effect.

The principal vertical block exemption framework is Communiqué No. 2002/2, as amended, and the general market-share threshold is 30%.

A franchise agreement below the threshold does not automatically receive protection for every clause.

Hardcore restrictions may remove the benefit of the block exemption.

Resale Price Maintenance

The franchisee should generally retain freedom to determine its resale prices.

The franchisor may provide:

• Recommended prices,
• Maximum prices,

provided that they do not become fixed or minimum prices through pressure or incentives.

High-risk practices include:

• Mandatory minimum price,
• Punishment for discounting,
• Withholding supply from discounting franchisees,
• Requiring approval for discounts,
• Monitoring and ordering price corrections,
• Coordinating franchisees' prices.

The Competition Authority has repeatedly examined franchise systems where resale prices and online sales were restricted, and it treats mandatory resale-price control as a serious competition issue.

A price called “recommended” may still be unlawful if the franchisee is not genuinely free to depart from it.

Promotional Campaigns

A franchisor may organize:

• National campaigns,
• Discount periods,
• Loyalty programs,
• Product launches.

The franchisee's participation should be structured carefully.

The agreement should address:

• Whether participation is voluntary,
• Who funds the discount?
• Treatment of franchisee margins,
• Duration,
• Competition law compliance.

A system-wide maximum promotional price is less risky than a mandatory minimum resale price, but implementation still requires review.

Territorial Protection

The franchisor may grant the franchisee:

• Exclusive territory,
• Protected radius,
• Exclusive customer group,
• Exclusive channel.

The agreement should define whether exclusivity prevents:

• Another franchise location,
• Franchisor-owned location,
• Online delivery,
• Supermarket sales,
• Airport or hotel locations,
• Institutional customers,
• Mobile sales.

A map or objective geographical description should be attached.

Statements such as “the Istanbul area” may be too uncertain.

Active and Passive Sales

Restrictions on active sales into a protected territory may be permissible under defined conditions.

A broad prohibition on passive sales is more problematic.

Passive sales generally arise where a franchisee responds to an unsolicited customer request.

The franchisor should be cautious about requiring a franchisee to:

• Refuse customers from another territory,
• Cancel unsolicited online orders,
• Block website access,
• Redirect all customers automatically.

These restrictions may prevent the agreement from benefiting from the vertical block exemption.

Online Sales and Delivery Platforms

Franchise systems increasingly operate through:

• Websites,
• Mobile applications,
• Food delivery applications,
• Online marketplaces,
• Social media.

The agreement should regulate:

• Approved platforms,
• Branding,
• Customer service,
• Delivery radius,
• Platform fees,
• Customer data,
• Online pricing,
• Reviews,
• Complaints.

The franchisor may impose proportionate quality requirements.

A complete prohibition preventing effective internet sales may create competition-law risk, particularly where the restriction operates as a passive-sales ban.

Non-Compete During the Agreement

The franchisor may require the franchisee not to operate a competing business during the contract.

This may be necessary to:

• Protect know-how,
• Prevent free-riding,
• Preserve common identity,
• Avoid disclosing to competing systems.

Under the general vertical exemption framework, non-compete obligations exceeding five years require careful assessment and may fall outside ordinary block exemption protection.

Franchise systems may receive more nuanced treatment where restrictions are genuinely indispensable for protecting transferred know-how and the common identity or reputation of the network. Turkish Competition Board decisions recognize that certain restrictions are necessary to protect a franchise network's identity and prestige may fall outside the ordinary prohibition.

This is not a blanket exemption for every long non-compete clause.

The franchisor should demonstrate why the restriction is necessary and proportionate.

Post-Termination Non-Compete

A post-term non-compete is more restrictive because the franchisee is no longer benefiting from the franchise system.

The clause should normally be limited by:

• Duration,
• Geographic area,
• Competing business,
• Premises,
• Know-how protection.

The ordinary vertical framework generally permits only narrowly defined post-contract restrictions, commonly limited to one year and tied to the premises from which the franchisee operated where necessary to protect know-how.

A clause prohibiting the former franchisee from conducting any similar business anywhere in Turkey for five years may face serious enforceability and competition-law objections.

Confidentiality obligations may continue longer where they protect genuine trade secrets.

Operational Control

The franchisor may require compliance with:

• Store design,
• Uniforms,
• Recipes,
• Product quality,
• Opening hours,
• Hygiene,
• Customer-service standards,
• Approved software.

These requirements are often essential to franchise consistency.

However, the agreement should distinguish between brand-quality control and complete management of the franchisee's independent business.

The franchisee should remain responsible for its own:

• Employees,
• Payroll,
• Taxis,
• Rent,
• Licenses,
• Customer contracts,
• Workplace safety.

Employment Risks

Employees working at the franchisee's location should ordinarily be employed by the franchisee.

The agreement should state that the franchisee is responsible for:

• Recruitment,
• Wages,
• SGK registration,
• Working hours,
• Termination,
• Work permits for foreign employees,
• Occupational health and safety.

Contractual wording alone may not protect the franchisor if the franchisor directly controls hiring, firing, salaries and daily employee instructions.

Operational support should be structured without creating the appearance of direct employment.

Regulatory Licenses

Depending on the sector, the franchisee may need licenses relating to:

• Food service,
• Tourism
• Education,
• Healthcare,
• Cosmetics,
• Real estate brokerage,
• Financial services,
• Transportation.

The contract should state:

• Which party obtains the license,
• Who bears the cost,
• What happens if approval is rejected,
• Whether fees are refunded,
• Whether the agreement terminates automatically.

A franchise agreement does not replace a legally required operating licence.

Store Location and Lease

A major franchise investment commonly depends on the store lease.

The parties should determine:

• Who selects the location?
• Whether franchisor approval is required,
• Who signs the lease?
• Lease duration,
• Renewal,
• Rent increase,
• Construction permits,
• Assignment after termination.

The lease term should be coordinated with the franchise term.

A ten-year lease combined with a three-year franchise agreement may expose the franchisee to major residual liability.

Where the franchisor leases the premises and subleases them to the franchisee, the termination consequences should be regulated expressly.

Construction and Fit-Out

The agreement should identify:

• Approved architect,
• Design standards,
• Construction budget,
• Equipment standards,
• Completion date,
• Delay responsibility,
• Ownership of fixtures.

The franchisee should not begin expensive construction before confirming:

• Franchise agreement,
• Lease,
• Municipal permits,
• Operating licenses,
• Trademark authority.

The franchisor should avoid approving a location informally and later denying responsibility after investment has begun.

Performance Targets

The franchisee may be required to meet:

• Minimum sales,
• Opening deadlines,
• Quality scores,
• Customer satisfaction,
• Expansion targets.

The agreement should state:

• How targets are measured,
• Whether VAT is included,
• Effect of closures,
• Supply failures,
• Economic disruption,
• Cure periods.

Failure to meet one target should not automatically justify immediate termination unless the contract clearly provides this and the consequence is proportionate.

Audit and Inspection Rights

The franchisor may inspect:

• Sales records,
• Royalty calculations,
• Store standards,
• Inventory,
• Customer service,
• Brand use.

The agreement should regulate:

• Notice,
• Frequency,
• Access to records,
• Confidentiality,
• Cost of audit,
• Under-reporting threshold.

The franchisor should not use audit access to collect unrelated confidential information or competitively sensitive data beyond legitimate network management.

Contract Duration and Renewal

The agreement may be:

• Fixed-term,
• Indefinite-term,
• Automatically renewable.

Renewal conditions should state whether the franchisee must:

• Remodel the location,
• Sign the current standard agreement,
• Pay a renewal fee
• Have no existing breach,
• Meet performance standards,
• Renew the lease.

A renewal clause should not suggest that renewal is guaranteed if the franchisor retains absolute discretion.

Ordinary Termination

An indefinite or renewable relationship should contain a reasonable notice mechanism.

The notice period should reflect:

• Duration of relationship,
• Initial investment,
• Remaining lease,
• Staff,
• Inventory,
• Time needed to de-brand,
• Dependence on the franchise.

A very short termination notice after substantial franchisor-approved investment may create claims based on contract, good faith or abuse of rights.

Immediate Termination

The agreement may allow immediate termination for serious breaches such as:

• Unpaid royalties,
• Trademark misuse,
• Counterfeit products,
• Unauthorized transfer,
• Disclosure of know-how,
• Serious food safety breach,
• Corruption,
• Loss of license,
• Insolvency,
• Abandonment of location.

Less serious breaches should generally be subject to:

• Written notice,
• Cure period,
• Reinspection.

The termination notice should identify:

• Contractual clause,
• Facts,
• Evidence,
• Effective date,
• Post-term obligations.

Insolvency and Concordat

A franchisee experiencing financial difficulty may apply for concordat or enter bankruptcy.

The franchisor should monitor warning signs such as:

• Unpaid royalties,
• Supplier defaults,
• Employee complaints,
• Returned checks,
• Tax attachments,
• Closure of locations.

The agreement should regulate insolvency consequences without ignoring mandatory insolvency rules.

A contractual clause stating that all rights automatically disappear on the filing of a concordat application may not always operate exactly as intended within a court-supervised restructuring.

Wrongful Termination

A wrongful termination may expose the terminating party to claims for:

• Lost profit,
• Wasted investment
• Construction expenditure,
• Unsold inventory,
• Lease liability,
• Employee costs,
• Damage to reputation,
• Contractual penalty.

The claimant must establish:

• Breach,
• Causation,
• Recoverable loss,
• Amount,
• Mitigation.

A franchisee cannot assume that all initial investment will automatically be reimbursed after every termination.

Goodwill Compensation

Unlike commercial agency and certain exclusive distribution relationships, a franchisee does not automatically receive a statutory goodwill payment merely because the franchise ends.

However, compensation may still be claimed depending on:

• Contract wording,
• Wrongful termination,
• Investments made at the franchisor's request,
• Customer portfolio transferred,
• Nature of the relationship,
• Applicability by analogy of other commercial rules.

The issue should be assessed according to the real contractual structure.

A franchise agreement that also operates as an exclusive distribution relationship may create different compensation arguments from a pure business-format franchise.

De-Branding After Termination

The agreement should contain a detailed de-branding procedure.

The former franchisee may be required to stop using:

• Trademark,
• Logo,
• Signs,
• Uniforms,
• Packaging,
• Menus,
• Website,
• Social media accounts,
• Telephone greeting,
• Delivery applications.

The contract should specify:

• Time allowed,
• Inspection,
• Removal cost,
• Destruction or return of materials,
• Transfer of digital assets,
• Continuing use penalty.

Continued trademark use after the license ends may constitute trademark infringement. Turkish trademark law provides civil remedies against unauthorised use, including prevention, cessation and damages under the applicable conditions.

Inventory After Termination

The agreement should address:

• Branded inventory,
• Perishable products,
• Packaging,
• Spare parts,
• Uniforms,
• Equipment.

Possible solutions include:

• Franchisor repurchase,
• Limited sell-off period
• Transfer to another franchisee,
• Destruction,
• Rebranding.

A sell-off period should not permit continued operation as an apparent franchise.

The agreement should state:

• Repurchase price,
• Condition,
• Transport,
• Expiry date,
• Payment timing.

Customer Data

The contract should define the parties' roles concerning customer data.

Questions include:

• Who controls loyalty-programme data?
• Can the franchisee use customer data after termination?
• Must data be transferred?
• Which records must be deleted?
• Who responds to data-subject requests?

The franchisor should not assume that every customer record automatically belongs to it.

The transfer and use of personal data must comply with applicable Turkish data-protection rules.

Transfer of the Franchise

The franchisee may wish to:

• Sell ​​the business,
• Transfer shares,
• Bring in an investor,
• Transfer to a family member.

The agreement should define:

• Franchisor consent,
• Buyer qualifications,
• Training,
• Transfer fee,
• Release of guarantees,
• Change-of-control threshold.

Consent should not be used arbitrarily where the contract requires a reasonable assessment.

The franchisor should investigate the proposed new owner before permitting transfer of brand and know-how rights.

Death or Incapacity of the Franchise

For an individual franchisee, the agreement should regulate:

• Death,
• Incapacity,
• Heirs,
• Temporary management,
• Transfer timetable.

A franchise should not automatically pass to heirs who lack:

• Qualifications,
• Capital,
• Licenses,
• Operational ability.

The agreement may permit heirs to sell the business to an approved operator within a defined period.

Dispute Resolution

The agreement should separately regulate:

• Governing law,
• Court jurisdiction or arbitration
• Language,
• Notices.

An international arbitration clause should identify:

• Institution,
• Seat,
• Number of arbitrators,
• Language,
• Governing law.

Possible institutions include ISTAC and other recognized international arbitration centres.

For lower-value domestic franchise disputes, Turkish commercial courts may be more proportionate than three-member international arbitration.

Mandatory Commercial Mediation

Franchise disputes between commercial businesses commonly qualify as commercial disputes.

Payment and compensation lawsuits may require mandatory mediation before litigation.

Potential mediation claims include:

• Unpaid royalties,
• Initial fee refund,
• Damages,
• Inventory repurchase,
• Contractual penalty,
• Wrongful termination compensation.

The dispute clause should not describe ordinary private negotiations as a substitute for legally required mediation.

Interim Protection

Urgent measures may be required where a former franchisee:

• Continues using the trademark,
• Transfers confidential manuals,
• Removes assets,
• Diverts online accounts,
• Operates as an apparent authorized franchisee.

Possible remedies may include:

• Interim injunction,
• Evidence determination,
• Trademark infringement proceedings,
• Precautionary attachment for monetary claims.

The applicant must satisfy the separate statutory conditions for the requested measure.

Common Drafting Mistakes

Common mistakes include:

• Franchisor does not own the Turkish trademark,
• Franchise registers the brand locally,
• Exclusive territory is undefined,
• Gross sales are not defined
• Royalty tax liability is omitted,
• Franchisor fixes minimum resale prices,
• Internet sales are absolutely prohibited,
• Non-compete is excessively broad,
• Lease term and franchise term conflict,
• Renewal appears guaranteed but is discretionary,
• No inventory procedure exists,
• No de-branding timetable exists,
• Customer data ownership is unclear,
• Signatory lacks authority,
• Foreign template conflicts with Turkish mandatory law.

Franchisor Checklist

Before granting a Turkish franchise, the franchisor should:

1. Register trademarks in Turkey.
2. Confirm authority to license all intellectual property.
3. Investigate the franchisee and beneficial owners.
4. Determine whether security is required.
5. Prepare accurate pre-contractual information.
6. Define territory and reserved channels.
7. Structure fees and taxes.
8. Review approved supplier arrangements.
9. Audit resale pricing rules.
10. Review online sales restrictions.
11. Limit non-compete obligations proportionately.
12. Coordinate franchise and lease duration.
13. Allocate licenses and regulatory responsibility.
14. Prepare de-branding procedures.
15. Choose governing law and dispute resolution.

Franchisee Checklist

Before signing, the franchisee should:

1. Verify Turkish trademark ownership.
2. Review franchisor litigation and network history.
3. Obtain complete fee information.
4. Prepare an independent financial model.
5. Review currency and tax exposure.
6. Confirm territory protection.
7. Identify direct and online sales exceptions.
8. Review mandatory suppliers and prices.
9. Check the lease term.
10. Review opening conditions.
11. Examine renewal discretion.
12. Review termination and cure periods.
13. Calculate post-term obligations.
14. Check inventory repurchase rights.
15. Obtain written copies of all promises.

Frequently Asked Questions

Is there a specific Franchise Law in Turkey?

Turkey does not have one comprehensive standalone franchise statute. Franchise relationships are governed through contract, commercial, intellectual property, competition, tax and sector-specific rules.

Can a foreign company franchise its brand directly?

Yes, but tax, trademark, regulatory and possible permanent-establishment consequences should be reviewed.

Must the franchisor register its trademark in Turkey?

Registration is strongly recommended. A foreign registration alone may not provide complete Turkish national protection.

Can a trademark license be exclusive?

Yes. Turkish law recognizes exclusive and non-exclusive licenses. Unless agreed otherwise, the license is non-exclusive.

Can the franchisor continue using the mark after granting an exclusive license?

Only if the right was expressly reserved. Otherwise, an exclusive license restricts the owner's own use within the licensed scope.

Should the license be recorded?

Recording is advisable, particularly for effectiveness against good-faith third parties and enforcement clarity.

Is mandatory franchise disclosure required?

There is no single general statutory franchise disclosure form. Misleading or incomplete material statements may nevertheless create contractual and damages liability.

Can the franchisor guarantee profits?

A genuine contractual guarantee is possible, but ordinary projections should not be presented as guaranteed results.

Can royalties be paid in foreign currency?

Potentially, subject to the contract and current Turkish foreign-exchange rules.

Are royalties subject to holding tax?

Payments to a foreign franchisor for trademark or similar intellectual property rights may be subject to domestic withholding tax. A double taxation treaty may reduce the rate if its conditions are met.

Is reverse-charge VAT applicable?

Services or rights supplied from abroad and used in Turkey may require the Turkish recipient to declare VAT through the reverse-charge mechanism.

Can the franchisor fix the franchisee's prices?

Fixed or minimum resale price control creates serious competition-law risk. Genuine recommended or maximum prices may be permissible.

Can the franchisor require participation in promotions?

The contract may regulate campaigns, but the arrangement should not become unlawful mandatory minimum or fixed resale-price control.

What is the competition-law market-share threshold?

The general vertical block exemption threshold is 30%.

Can the franchisor ban all internet sales?

A complete prohibition preventing effective online sales may be treated as a serious competition restriction.

Can the franchisee be given an exclusive territory?

Yes. The agreement should define franchisor-owned stores, online channels, global accounts and other exceptions.

Can franchisees sell to customers from another territory?

Restrictions on actively targeting protected territories may be possible. Refusing unsolicited passive orders creates greater competition-law risk.

Can the franchisee operate a competing business?

A proportionate in-term non-compete may be used, especially to protect confidential know-how and network identity.

Can the non-compete last longer than five years?

Longer restrictions require specific competition analysis. Franchise know-how and network-identity considerations may be relevant, but there is no automatic unlimited exemption.

Can the franchisee be prevented from competing after termination?

Only through a narrowly drafted and proportionate restriction. Duration, location, activity and know-how must be considered.

Can the franchisor require approved suppliers?

Yes, particularly for quality and brand consistency, but competition-law and pricing consequences should be reviewed.

Must the franchisor buy back inventory?

Only if the agreement or applicable legal principles require it. The agreement should address inventory expressly.

Can the franchisor terminate immediately for late payment?

The agreement may identify serious payment default as a termination ground, but notice and cure requirements should be reviewed.

Can a minor breach justify immediate termination?

Not necessarily. A proportionate cure period should be provided for remediable breaches.

Does the franchisee receive goodwill compensation automatically?

No. Any compensation depends on the contractual structure, termination circumstances and applicable legal principles.

What happens to social-media accounts after termination?

The agreement should require transfer, closure or rebranding of accounts using the franchise trademark.

Can the franchisee continue using the trademark during a dispute?

Not merely because a dispute exists. Continued use after valid license termination may constitute infringement.

Are franchise disputes subject to mediation?

Qualifying commercial payment and compensation claims generally require mandatory mediation before a Turkish lawsuit.

Can disputes be resolved through arbitration?

Yes. The arbitration clause should clearly identify the institution, seat, language and number of arbitrators.

Conclusion

Franchising in Turkey requires more than translating an international franchise template into Turkish.

The agreement must coordinate:

• Trademark licensing,
• Know-how,
• Operational standards,
• Fees,
• Tax,
• Competition law,
• Territory,
• Online sales,
• Termination,
• De-branding.

The franchisor should first protect its trademark in Turkey and confirm that the company granting the license is legally entitled to do so.

The agreement should state whether the trademark license is exclusive or non-exclusive. Unless otherwise agreed, a trademark license is treated as non-exclusive. In an exclusive license, the trademark owner should reserve expressly any right to continue using the mark.

Initial fees, royalties, advertising contributions and technology fees should be defined separately. Where payments are made to a foreign franchisor, Turkish withholding tax, double taxation treaties and reverse-charge VAT must be considered.

Competition law is one of the greatest franchise risks.

The franchisor should not impose fixed or minimum resale prices. Recommended and maximum prices must remain genuinely non-binding.

Territorial restrictions should distinguish between active and passive sales. A broad ban on online or unsolicited sales may prevent the agreement from benefiting from the vertical block exemption.

The general vertical block exemption market-share threshold is 30%. Restrictions extending beyond the permitted framework require individual assessment.

Non-compete obligations may be justified where necessary to protect know-how and the common identity of the franchise network. However, duration, territory and scope must remain proportionate.

Termination provisions should address:

• Notice,
• Cure periods,
• Existing customer orders,
• Inventory,
• Store closure,
• Employee and lease consequences,
• Online accounts,
• Trademark removal.

Continued use of the trademark after termination may expose the former franchisee to infringement claims and interim injunctions.

Before signing, the franchisee should independently verify the total investment, taxes, supply obligations, territory protection, renewal conditions and realistic profitability of the business.

The safest franchise structure is one in which both parties understand from the beginning how the relationship will operate, how fees will be calculated and how the business will be separated if the relationship ends.