Franchise Law in Turkey: A Strategic Legal Guide for International Brands

For global entrepreneurs, Turkey represents one of the most dynamic retail and service markets in the EMEA region. However, understanding the legalities of the “Franchise System” is crucial because, unlike some jurisdictions, there is no specific, standalone Franchise Law in Turkey. Instead, franchise agreements are “atypical contracts” governed by the principles of freedom of contract under the Turkish Code of Obligations and several other regulatory frameworks.

1. The Legal Nature of Franchising in Turkey

Since there is no dedicated legislation, a franchise agreement is considered a Sui Generis (Unique) Contract. It combines elements of sales, agency, and licensing agreements. In the absence of a specific law, Turkish courts refer to:

• The Turkish Code of Obligations: For general contract rules and termination.
• The Turkish Commercial Code: Regarding commercial titles and the status of the “merchant.”
• The Industrial Property Code (No. 6769): For trademark protection and licensing.
• The Law on the Protection of Competition: For vertical agreements and price-fixing restrictions.

2. Essential Pillars of a Turkish Franchise Agreement

To be enforceable and effective under Franchise Law in Turkey, an agreement must clearly define four core components:

1. Transfer of Know-How: The franchisor must provide a distinct, confidential, and identified set of practical information (the “secret sauce”).
2. Intellectual Property (IP) Licensing: The right to use trademarks, logos, and trade names.
3. The System Fee (Royalties): Clear structures for the initial entry fee and ongoing royalty payments (usually a percentage of gross turnover).
4. Continuous Support and Supervision: The franchisor’s right to inspect the franchisee’s operations to ensure brand uniformity and quality.

3. Competition Law: The “Hidden” Regulator

Competition Law is perhaps the most critical secondary aspect of Franchise Law in Turkey. The Turkish Competition Authority (RK) strictly monitors franchise networks to prevent:

• Resale Price Maintenance (RPM): A franchisor cannot generally force a franchisee to sell at a fixed price (though “recommended” or “maximum” prices are usually permitted).
• Exclusivity and Territorial Restrictions: While you can grant an “exclusive territory,” preventing “passive sales” (selling to a customer from another region who initiates the contact) can sometimes lead to anti-trust violations.

4. Non-Compete Clauses and Post-Term Restrictions

A major concern for foreign franchisors is whether a former franchisee can start a rival business.

• During the Contract: Non-compete clauses are strictly enforceable.
• Post-Termination: Under the Turkish Code of Obligations, post-term non-compete clauses are generally valid only if they are limited in time (usually up to 1 year), geography, and scope of activity.

5. Disclosure Obligations and “Good Faith”

Even without a specific disclosure law, the principle of “Objective Good Faith” (Turkish Civil Code Art. 2) requires franchisors to provide accurate and sufficient information to potential franchisees regarding the system’s profitability and risks. Providing misleading financial projections can lead to lawsuits for “Pre-contractual Liability” (Culpa in Contrahendo).

6. Termination and Compensation

Ending a franchise relationship in Turkey requires careful timing.

• Termination for Cause: Immediate termination is possible if a fundamental breach occurs (e.g., non-payment of royalties or damaging the brand’s reputation).
• Goodwill Indemnity (Portföy Tazminatı): This is a unique risk. In some cases, Turkish courts apply the “Agency Law” by analogy, meaning a franchisee might be entitled to “goodwill compensation” upon termination if they have significantly expanded the franchisor’s customer base.

Procedural Checklist for International Brands

• Trademark Registration: Before signing any agreement, your trademark must be registered with the Turkish Patent and Trademark Office (TÜRKPATENT). International registrations are not always sufficient for local enforcement.
• Notarization: While not strictly mandatory for the contract itself, certain IP transfers or powers of attorney must be notarized to be used before Turkish authorities.
• Language: If the franchisor is a foreign entity, the contract should be in Turkish (or a bilingual format) to comply with the Law on the Mandatory Use of Turkish in Economic Enterprises.

Conclusion

Navigating Franchise Law in Turkey requires a “contract-heavy” strategy. Because the law does not provide a safety net of specific statutes, the franchise agreement itself must be a fortress—detailed, balanced, and compliant with local competition and IP laws.