How to Plan Territorial Protection in a Franchise Agreement

When opening your existing business up to franchising, it is easy to tell prospective franchisees, “this territory is yours”. Managing the scope of that promise requires careful preparation. Territorial protection is not simply a boundary drawn on a map: it is a commitment affecting the franchisor’s future growth. For a healthy franchise network, you should establish which outlets may open, where and under what conditions before signing the first agreement.

1. Start by defining what protection means

Territorial protection can cover different rights. A commitment by the franchisor not to open its own outlet in an area is not the same as a commitment not to grant another franchisee the right to operate there, or to reserve particular customer groups. Simply using the phrase “exclusive territory” in the agreement can leave the parties with different expectations.

Start by setting out the protection your business can offer in a decision table:

• Company-owned outlets: Will you be able to open a new company-owned outlet within the protected area?
• Other franchised outlets: Will another operator be granted rights under the same brand?
• Different business formats: Does the same protection cover small retail units, kiosks or pop-up shops?
• Special locations: Is there a separate approach for airports, hospitals, universities and shopping centres?
• Existing outlets: How will you treat outlets that are already open or for which agreements have already been signed?

Make every exception specific. A broad clause such as “the franchisor may open outlets wherever it considers necessary” could render the protection effectively meaningless. Prospective franchisees should be able to understand the exceptions before making their investment decision.

2. Prepare the map using business data

Defining a territory solely by the name of an administrative district may seem practical, but administrative boundaries do not always reflect customer movements. Main roads, transport links, pedestrian access and physical barriers can separate two locations within the same district. Conversely, outlets in different districts may serve the same customer base.

Examine your existing business’s customer catchment area. Assess roughly where customers come from, how often they visit and the business’s service capacity. If you use personal data, comply with the relevant legal obligations; work with aggregated data wherever possible. The aim is not to promise a specific level of sales, but to establish a basis for your territorial protection decisions.

Include a legible map and a written description of the boundaries in a schedule to the agreement. State the map’s date and version, along with the reference points used to draw the boundaries. Also agree which takes precedence if the map and the text conflict.

For example, if opposite sides of a street fall within different territories, clarify whether the boundary follows the centre line of the road or is determined by building addresses. Changes to municipal boundaries or street names should not automatically create uncertainty about the contractual protection. Plan how address changes will be documented at this stage too.

3. Recognise the limits of freedom of contract in Türkiye

Türkiye has no dedicated franchise law governing franchise relationships in their entirety. Nor is there a general requirement to register franchise systems in a public register or provide a mandatory, standardised pre-contractual disclosure document. Nevertheless, the principle of good faith and liability arising from contractual negotiations require accurate communication of information that affects an investment decision.

Franchise agreements are subject to the general provisions of the Turkish Code of Obligations No. 6098. Depending on the commercial relationship, the Turkish Commercial Code No. 6102 may also be relevant, as is the Industrial Property Code No. 6769 in relation to trade mark rights. For territorial protection, particular attention should be paid to the Law on the Protection of Competition No. 4054.

The Block Exemption Communiqué on Vertical Agreements No. 2002/2, which can apply to vertical relationships, provides a framework for assessment subject to certain conditions. The former Block Exemption Communiqué on Franchise Agreements No. 1998/7 is no longer in force. Entering into a franchise agreement does not automatically make territorial restrictions lawful.

The distinction between active sales and passive sales — responding to unsolicited customer requests — is particularly important. Do not place sales activities targeting another territory and responses to unsolicited customer enquiries under the same prohibition. Absolute territorial protection and restrictions on passive sales can create competition law risks. Have a specialist lawyer assess the provisions against your specific distribution structure and the applicable exemption conditions.

4. Document the process for new outlets and boundary changes

Territorial protection does not automatically confer a right to open new outlets or a priority right over future outlets. If either right is to be granted, it must be defined separately. Otherwise, the franchisee may assume that every growth opportunity within the protected territory belongs to them.

Establish the process to follow when a new location is proposed: who will check the map, where will existing commitments be verified, and what information will be given to the affected operator? If there is a priority right, make clear what the offer covers, the deadline for responding and what happens if no response is received.

If you intend to make protection conditional, the conditions should be measurable, verifiable and consistent with the agreement. Explain the circumstances in which boundaries may change and the notification and agreement process required. Do not disregard earlier commitments in order to promise a larger area to a new investor.

Maintain a single central territory register. For each area, record the signed version of the map, any exceptions, existing outlets and any priority rights. Check the sales team’s presentations against this register: protection that does not appear in the agreement should not be promised during negotiations.

Practical takeaway: Before making your first franchise offer, prepare a territory map, a table defining the scope of protection and a process for assessing new outlets. If these three documents are inconsistent with one another or have not undergone a competition law review, do not present territorial protection as a firm promise.