FRANCHISE AGREEMENT
The franchise agreement is an agreement concluded to expand the customer base of the supplier merchant and increase its circulation, and it is not a type of contract regulated in the Turkish Code of Obligations or other legislation. The main elements of the franchise agreement are; is a framework agreement, creates constant debt for the parties, the dealer acts on his name and account, and the dealer is included in the supplier's production network without losing its independent trader nature. Although there are many several opinions in the doctrine about the structure of the franchise agreement, the majority opinion is that the agreement is sui generis.
Since the franchise agreement establishes a contractual relationship that imposes obligations on both parties, the general provisions regarding the breach of the agreement can be applied to the franchise agreement as long as it conforms to its nature, especially in case the parties do not fulfill their mutual obligations.
The main obligations of the dealer towards to provider can be summarized as minimum purchasing and making the relevant payment, operating to increase sales and circulation, fulfilling customer services, protecting the interest of the provider, secrecy, and non-compete. In contrast, the obligations that the supplier is obliged to fulfill to the dealer are to ensure that the order delivery is carried out perpetually and regularly and to support the dealer.
Agreements that are referred to as franchise agreements in practice are similar to agency agreements which are fallen into the Turkish Commercial Code the provisions of 122 and cont. and it is seen that these agreements have most of the elements of the agency agreement. One of the points that should be examined to apply the provisions of the agency agreement to the franchise agreement is whether the dealer is integrated with the manufacturer's distribution network and, if so, to what extent. As in agency contracts, in franchise agreements, the criteria for determining whether the dealer is included in the manufacturer's production network are whether the dealer has obligations such as having a certain contract area, carrying out advertising activities in favor of the manufacturer, supporting customers. In addition, the dealer should make sufficient stock, not compete with the manufacturer, and pay attention to the interests of the manufacturer.
In addition, in most dealership agreements, there is a monopoly right that arises when the supplier does not make sales in person or through other dealers and the dealer does not compete with the supplier within the region granted to the dealer.
The franchise agreement can be concluded for a limited or indefinite period. Dealership agreement for both definite and indefinite periods can also be terminated by termination. Each of the parties can terminate the indefinite-term dealership agreement, which is called ordinary termination, but the prohibition of material abuse of the right draws the limit of this right. In case of open abuse of the right of termination, the claim for compensation of the other party will come to the agenda. In the presence of a justifiable reason, each party may terminate the franchise agreement for a definite or indefinite period at any time. This opportunity that the parties have is called extraordinary termination. The contract terminates prospectively with the receipt of the extraordinary termination notice to the other party. In terms of proof, depending on the fact that the parties are merchants, the termination declaration must be made in accordance with the provisions of the TCC 18/3.
In case of termination of the contract, the individual sales contracts are not affected until they are terminated for a reason other than just termination. However, after the end of the contract, it is essential to liquidate the products and return them to the supplier. In case of termination of the dealership agreement for just cause, it is accepted that the equalization right granted to the agents in the TCC will also be applied to the dealerships to the extent appropriate, provided that it includes the monopoly right. In the franchise agreement, the parties can also decide on the non-compete clause after the agreement. However, this agreement will also be subject to the provisions of TCC 123.
In disputes arising from dealership contracts, first of all, evaluation should be made according to the above-mentioned criteria, and the issue of whether or to what extent the provisions specific to the relevant dealership contract and agency contract will be applied, should be considered as a priority. Subsequently, the legal nature of the termination made by any of the parties and whether it constitutes an unjust termination should be answered and the consequences of this termination should be revealed.
Our office provides services to clients in the form of examining the dealership contracts of clients with a widespread dealer network within the scope of preventive legal consultancy, and executing dispute resolution methods in disputes arising from dealership contracts.