A popular business model for expanding market reach and brand recognition worldwide is franchising. Despite being less common than distribution agreements in the form of mono-brand store agreements, franchising is another significant method for extending luxury brands' distribution networks. Luxury brands use franchising as a strategy to enter new markets as they benefit from the expertise and market knowledge of local partners. The foundation of franchising relationship is the franchise agreements. This article explores the franchise agreements in general, main obligations of franchisor and franchisee, how they differentiate in luxury franchising and expiry and termination of franchise agreements.
Franchise Agreements in General
There is no regulation governing franchise agreements nor a definition of franchise under Turkish law. Parties may freely determine the terms and conditions of franchise agreements provided that they comply with applicable Turkish legislation mainly contracts law, commercial law, intellectual property law and competition law.
The 19th Civil Chamber of the Court of Cassation, in its decision dated 25.06.2001, defined franchise agreements as follows: "Franchising is a contractual relationship comprising a long-term and continuous business relationship between two independent parties arising from the privilege granted by the party having the franchise right of a product or service to the second party to carry out the transactions subject to the franchise right by providing information and support regarding the management and organization of the business within a certain period of time and within the conditions and limitations.”[1]
To put it more simply, franchise agreements are long-term commercial agreements, where franchisor provides franchisee with the right to use its trademarks, products and system in exchange for a fee and adherence to certain obligations; and franchisee, in return, agrees to operate a retail location in accordance with the franchisor's standards and guidelines.
