FRANCHISING AND THE LEGAL NATURE OF FRANCHISE

FRANCHISING

• • What is Franchising?

 Franchising is the granting of the franchisee of a brand to independent investors, in return for a certain financial cost, by providing support for the management and execution of the business under certain conditions. Franchise literally means “concession.”

Franchising is a business model where a company (the franchisor) grants the right to use its brand, products, services, and operating system to another person or company (the franchisee) in exchange for an initial fee and ongoing royalties. The franchisee operates a business under the franchisor’s brand name and receives support and guidance from the franchisor in areas such as marketing, training, and operations.

• • What are the Advantages of Franchising?

While providing advantages such as growth and increase in business volume for the franchisor, it increases profits without the need for businesses to make payments such as entrance fees. In this way, it allows them to develop and grow at a very low cost.

For the franchisee, there are many advantages such as continuous training and technology support, advertising and promotion. In addition, those who will open a private business for the first time will have the advantage that they can manage a business at a lower cost without facing a difficult and complex process.

• • Legal Nature of Franchising Agreement

The franchise agreement is not regulated in the Code of Obligations. This contract, like other contracts, is subject to freedom of contract, provided that it is within the framework of the rules of law. Within the scope of this contract, both parties have mutual obligations to fulfill.

For example, while the franchisor is under the obligation to make the business and marketing system available to the franchisee, the franchisee is under the obligation to make and support the release of goods and/or services on its own behalf and account, the obligation to use the intellectual and industrial elements in the production, business and marketing system and to contribute to the continuation of their legal and actual existence, and especially to inform the franchisor of any infringement thereof, the obligation to comply with the production, business and marketing principles contained in the system and determined by the franchisor, and the obligation to pay a fee. In this case, it can be said that it is a contract that imposes obligations on both parties.

Since the obligations that are the subject of franchise agreements are not fulfilled immediately by fulfilling the obligation, but by spreading over the duration of the contract, there is a continuous debt relationship. Since there is a continuous debt relationship within the scope of the franchise agreement, the termination of the agreement will not be terminated by the fulfillment of the debt, but a fixed-term franchise agreement will be terminated automatically upon the expiration of the contract period agreed by the parties, and an indefinite-term franchise agreement will be terminated by ordinary termination notice.

To summarize briefly, franchising is currently a business model in which one company gives another person or organization the right to use its brand name, products and services in exchange for a certain fee and royalties. The franchisee benefits from the existing company’s brand recognition, business model and support from the franchisor, while the franchisor grows its business through the franchisee’s efforts

Franchising can be a great opportunity for entrepreneurs looking to start a business, but it is important to conduct thorough research and understand the terms and obligations of the franchise agreement before signing the franchise agreement.