How to Protect Deposits and Advance Payments When Buying a Franchise

During franchise negotiations, you may be asked to “reserve your place” or “pay the application fee” before you receive a detailed contract. But simply describing a payment as a “deposit” does not establish when you can recover your money. For an entrepreneur planning to enter the franchise market in Türkiye, the first payment is not merely a reservation: it is a decision requiring legal and financial due diligence. This guide focuses on protecting payments requested before the business opens.

1. Establish the payment’s legal function, not just its name

An application fee, reservation fee, deposit and initial franchise fee do not mean the same thing. Start by asking: What specific right or service do I receive in return for this money? Assessing your application, negotiating exclusively with you for a set period, and paying part of a future initial franchise fee each require different arrangements.

Under Article 177 of the Turkish Code of Obligations No. 6098, unless otherwise agreed, money paid when a contract is concluded is treated as a payment confirming that the contract has been made, rather than a payment giving the parties a right to withdraw. It is deducted from the principal amount due. It is therefore unsafe to assume that “I have paid a deposit, so I can withdraw whenever I like and get it back”.

The withdrawal payment under Article 178 is different. Where such an arrangement exists, either party may withdraw: if the payer withdraws, they forfeit the payment; if the recipient withdraws, they must repay twice the amount received. Whether a particular payment falls within this category depends on the substance of the agreement, not merely the label used.

The payment document should clearly state the payment’s purpose, what you receive in return and whether it will be credited against a later amount due. It should also explain precisely which circumstances any “non-refundable” wording covers.

2. Take account of the absence of a mandatory franchise disclosure document

Türkiye has no dedicated franchise law governing franchise agreements as a standalone area. Nor is there a general public register specifically for granting franchises, a mandatory pre-contractual franchise disclosure document or a standard waiting period. Trade registry registration and operating permits do not amount to official franchise approval.

The relationship is governed by general legal provisions, principally the Turkish Code of Obligations No. 6098 and the Turkish Commercial Code No. 6102. Depending on the arrangement, the Law on the Protection of Competition No. 4054 and the Industrial Property Law No. 6769 may also be relevant. The duty of good faith and liability arising during contract negotiations remain relevant despite the absence of a dedicated disclosure regime.

The lack of a mandatory franchise disclosure form does not mean that misleading information has no consequences. General legal remedies may be available in cases involving mistake, fraud, invalidity or breach of obligations; the outcome depends on the circumstances and the evidence.

Before paying, request the draft agreement and all its annexes. You do not have to accept a “payment first, contract later” approach. Nor should you assume that consumer cancellation rights automatically apply when you acquire a franchise for business purposes.

3. Verify the recipient and the signatory’s authority

The brand name you are dealing with may differ from the registered company name of the business requesting payment. This is not necessarily a problem, but the legal relationship must be explained. Check the identities of the parties signing the contract, issuing the invoice and receiving the money together.

Before making a payment, request the following documents and information:

• The contracting party’s full registered business name, address and registration details.
• Documents showing the signatory’s current authority to represent the company.
• Bank account details identifying the account holder.
• Explicit authorisation if an intermediary will collect the payment.
• An explanation of the document that will be issued to record the payment for accounting purposes.

If negotiations are being conducted on behalf of a company but you are asked to pay into a personal account, seek further explanation and verification. Confirm in writing whether payment to an intermediary discharges your payment obligation to the franchisor. Include the date of the payment agreement and the purpose of the payment in the bank transfer reference; remember that a bank transfer receipt alone will not prove all the agreed terms.

4. Link refund terms to objectively verifiable events

If the main agreement is not yet ready to be signed, have a brief but clear advance payment agreement drawn up before you pay. Bear in mind that this agreement can itself create binding obligations. Rather than accepting phrases such as “to be considered if the parties cannot agree”, specify clear decision points.

The agreement should cover at least:

• The amount payable, the currency and whether taxes are included.
• The work to be carried out in return for the payment and the deadlines for completion.
• The proposed deadline for signing the main agreement.
• What happens if the premises are unsuitable, financing is unavailable or the necessary permits cannot be obtained.
• The events triggering a refund, the repayment deadline and the account to which it must be paid.
• If deductions are permitted, their justification, calculation method and supporting documentation.

For example, a bank’s refusal to approve financing may not automatically entitle you to a refund. If financing is a prerequisite for you, negotiate this before paying. Similarly, the franchisor rejecting your proposed premises need not have the same consequences as your decision to choose a different location.

Ask a lawyer to review any clause allowing the other party to retain the entire payment in all circumstances without defining any obligations on their part. Standard contract terms may be subject to scrutiny under the rules governing general terms and conditions, but do not assume that every onerous clause is automatically invalid.

5. Plan payments around documents and milestones

Where possible, propose staged payments linked to the completion of specified tasks rather than paying the full amount upfront. Establish which documents must be delivered at each stage and who must approve completion. This can limit your financial exposure for work that has not yet been carried out.

Keep contract drafts, offers, correspondence and payment records in chronological order. Obtain written confirmation of verbal promises. If a dispute arises after payment, seek legal advice on the grounds for requesting a refund and the appropriate method of giving notice; do not rely solely on telephone conversations.

Practical takeaway: Before sending money, obtain written answers to three questions: Who am I paying, what am I receiving in return, and under what conditions can I get my money back? If any answer is unclear, complete the documentation first and pay afterwards.