What are Franchise Contracts?
The franchise contracts authorizes the franchisee to make the version and distribution of goods and services by using non-elements such as brand, symbol, trade title, know-how to the franchisee, but the franchisee undertakes the obligation to continuously support the field and integrate it into its own system; the franchisee undertakes to make the version of the goods and services in his own name and account and pay a certain fee in accordance with his marketing principles and instructions using the non-material elements of the franchisee; it is a contract that is organized by independent parties in vertical cooperation, which has not yet been regulated in the law that creates a continuous debt relationship, and imposes debt on both sides. The purpose of the franchise contracts is to make a version of the goods and services.
What are the Elements of Franchise Contracts?
Franchise agreements are contracts that generate continuous debt and both parties have continuous debt.
The franchise agreement is a framework agreement and the rights and liabilities of the parties are determined only in general terms. Issues requiring details such as delivery of goods, raw material supply stages, what are the basic elements of training, advertising, etc. are decided by additional complementary contracts.
The franchisee is a private enterprise that operates on its own behalf and account.
In the franchise agreement, the parties come together for the common purpose of realizing the version of the goods or services subject to the contract. Since franchisees and franchisees are on different economic steps, there is vertical cooperation between them.
The typical and fundamental element of franchise agreements that impose debt on both sides is the debt of paying fees. While the original duty of the franchisee is the payment of fees; franchisee is under the control of the franchisee to make available services such as production, operation and marketing system to the franchisee.
The franchise agreement is established with statements of will on both sides.
Form of Franchise Agreements
Since there is no regulation in the law regarding the form of the franchise agreement, this contract may be made without adhering to any form in accordance with the freedom of form regulated in Article 12/I of the Turkish Law on Debts.
Types of Franchise Agreements
The franchise agreement is divided into two parts according to the countries in which the parties reside and perform their transactions. If the franchise agreement is applied within the borders of a country, “national franchise” is applied within the borders of more than one country, there is an “international franchise”.
As of the subject of the franchise agreement, it is divided into three groups: “material franchising”, “service franchising” and “production franchising”. If your contract constitutes the realization of the consumer version of the goods in question, then “goods franchising” is mentioned. The subject of the contract is “service franchising” in cases where standardized services are provided to the consumer. The subject of the contract refers to “production franchising” if the franchisee prepares and sells his goods by producing or operating them.
Franchise agreements are subject to quadruple separation of manufacturer-retailers,” “wholesalers-retailers,” “manufacturer-wholesalers” and “retailer-retailers” based on the economic steps the parties are in.
Franchise agreements can also be classified according to the content and nature of the contractual transactions and franchise recipients.
DEBTS OF THE PARTIES
Since there is a principle of reciprocality between the steps of the franchise agreement parties that impose debts on both parties, one party’s debts constitute the rights of the other party.
DEBTS OF WHO IS GIVING FRANCHISE
Disclosure and disclosure of the franchise area prior to the contract,
It has an obligation to use the intangibles in the franchise system to the franchisee, to benefit it from these intangible goods and to continuously protect the franchise area. As non-material goods that the franchisee is obliged to use in the franchisee: patent right, trademark right, trade title and business name, identifying elements of goods and services, know-how information.
The franchise area has protection and support liabilities. Under this heading, the franchisee is required to help the franchisee establish the operation of the franchise area and its equipment. At the same time, there is a responsibility to provide the necessary training and information to the franchisee.
The franchisee is under the obligation to deliver the materials, tools and equipment necessary for the release of the goods and services to the franchisee. These goods and services should not be less quality than medium quality, but should comply with standards.
For the activities of the franchisee in relation to the franchise system, which is clearly agreed in the franchise agreement, a certain monopoly may be indebted to allocating the territory and not establishing a franchise agreement with third parties within that region.
DEBTS OF WHO IS TAKING FRANCHISE
The franchisee has a fundamental and continuous duty to use the franchise system and to provide and increase the version of the franchisee’s assets while fulfilling the obligation to protect and support the franchise area.
At the same time, the franchisee has an obligation to pay a certain fee to the franchisee under the contract.
In order to integrate the franchise system and create a common image, the franchisee owes the franchisee the franchisee’s use of intangibles and the franchisee’s instructions and controls.
Since the franchise agreement is a continuous debt-incurring contract, it establishes a trust relationship between the parties and as a result of this relationship, the franchisee must protect the interests of the franchisee and show loyalty. During the contract, it must compete with the franchisee and keep the information and secrets given to him/ her. One of the requirements of this trust relationship established is the obligation of the franchisee to personally perform its debts arising from the franchise agreement.
There is a necessary information and accountability debt within the scope of the franchisee contract. As a requirement of this debt, the franchisee must provide information and accountability regarding the turnover of the enterprise, the amount of goods in stock, new goods entering the market, etc
EXPİRATİON OF THE FRANCHİSE AGREEMENT
Franchise agreements established within the framework of contract freedom can end in two ways, such as self-termination and termination by legal action.
If the contract expires on its own, the contract will end on its own at the end of the specified period if a certain period of time has been recorded at the time of the contract. In addition, franchise agreements issued on the basis of subjective nature, merit and savings capability of the parties expire spontaneously if not otherwise agreed as a result of the death, loss of license, bankruptcy or failure to pay by one of these parties. Although this is a contract in which the nature of the party is important, it can also be decided to continue the contract in the continuation of the franchise system in cases where the personality of the parties does not matter, taking into account the interests of the parties.
One of the cases of self-termination of the contract is the termination of the contract by legal action. Terminations with legal proceedings; substikale is the cancellation of the contract or termination of the contract.
Although the substiation means the agreement of the parties, the parties may always terminate the agreement without any conditions with the agreement between them.
In case the free will of the parties is injured due to error, deception or intimidation, it will be possible to cancel the contract due to will injury in accordance with the provision of the CPC.
In addition, the parties may terminate the contract with a declaration of will that must be directed unilaterally to the other party that the parties are no longer bound by the contract by the termination of the Turkish Law of Obligations.
Consequences of Expiration of the Franchise Agreement
Franchisee’s Expiration Liabilities
In accordance with the goodwill and honesty rule contained in Article 2/1 of the Turkish Civil Code, the franchiser must continue to look after the interests of the other party even if the contract expires, serve the commercial gain of both parties in the legal savings he will carry out and refrain from taking actions and attitudes towards the intentional damage of the franchisee.
The starting price in the franchise agreement is the price paid by the franchisee in order to increase the version of the goods subject to the contract, to manage the business in a healthy manner and to ensure financial profit. If the contract expires before the expiration date, the starting price must be refunded to the franchisee for the amount corresponding to the remaining contract period.
During the period, as a result of commercial activities and initiatives carried out by the franchisee in the free market, due to the significant increase of the franchisee’s customer base and the naturally released product market, the franchisee continues to unilaterally benefit from the commercial relationship despite the termination of the contract in question, the franchisee is required to equate the franchisee with the added value added to the operating system and fairness. Discoverable. This equivalence claim from the franchisee is also called customer compensation or portfolio compensation.
Expiration Liabilities Of Who Is Takıng Franchıse
During the duration of the franchise agreement, the non-material goods used by the franchisee must not continue to be used and must be returned to the franchisee.
After the expiration of the franchise agreement, the franchisee is not owed the non-contractual competition against the franchisee unless otherwise agreed by the other parties. However, when looking at the contractual relations, the prohibition protocol between the franchisee and the franchisee is included within the framework of the contractual relationship. In the event of a competition ban, the franchisee owes me a debt of not competing within a certain waiting period.
In franchise agreements, the obligation of the franchisee to retain information given to it by the franchisee and covered by the trade secret continues even if the contract expires.
