How to Review the Dispute Resolution Clause in a Franchise Agreement

When buying a franchise, it is easy to overlook the dispute resolution clause tucked away in the final pages of the agreement. Yet this clause can determine where, in which language and at what cost you can enforce your rights if a disagreement arises. Before joining a franchise network in Türkiye, examine not only the commercial terms but also how they will be enforced. A well-drafted dispute resolution clause helps the parties resolve problems before they escalate and obtain effective legal protection when needed.

1. Distinguish the legal framework from the governing law

Türkiye has no dedicated franchise law that regulates franchise agreements on its own. Nor is there a general public registration requirement or mandatory pre-contractual disclosure document system specifically for franchising. This does not mean that franchise relationships fall outside the law or that every contractual provision is necessarily valid.

The main legal framework consists of the general contract provisions of the Turkish Code of Obligations No. 6098, the Turkish Commercial Code No. 6102, the Law on the Protection of Competition No. 4054 and, for rights such as trade marks, the Industrial Property Code No. 6769. The principle of good faith and liability arising from pre-contractual negotiations are also important considerations.

The governing law and the forum that resolves a dispute are not the same thing. An agreement may be governed by Turkish law while disputes are resolved through arbitration. In relationships involving a foreign element, the parties may also choose another country’s law. However, that choice does not automatically displace Türkiye’s overriding mandatory rules.

Answer each of these questions separately when reviewing the draft:

• Which country’s law governs the agreement?
• Will disputes be resolved in the courts or through arbitration?
• Where will proceedings take place, and in which language?
• Will further proceedings in another country be needed to enforce the judgment or award?

Pay particular attention to this distinction if you are working with a foreign brand. Your business in Türkiye may incur costs for advice on foreign law, translation and cross-border enforcement.

2. Treat the choice of court as an access issue, not just a location

Do not treat wording such as “the courts where our head office is located shall have jurisdiction” as merely a choice of address. Conducting litigation in a city far from your business may create additional burdens when coordinating with your lawyer, submitting documents and attending hearings where necessary. Online communication can reduce these burdens, but it does not eliminate them.

Under the Turkish Code of Civil Procedure No. 6100, the ability to enter into a jurisdiction agreement is subject to conditions, notably the parties’ status as merchants or public legal entities. A written agreement, a specified or identifiable legal relationship and the designation of the competent court are also important. Do not assume that a document you sign in your own name before incorporating your company has the same legal standing as an agreement between companies.

Also, territorial jurisdiction and subject-matter jurisdiction are different. The parties cannot give a court jurisdiction over a type of claim that it has no statutory power to hear simply by naming it in the agreement. Whether wording such as “all disputes shall be resolved in this court” covers every potential claim requires legal review.

During negotiations, ask for a specific city and a clearly identified forum. Ask whether you would have to bring proceedings in a new location if the franchisor later moved its head office. Have your lawyer separately check the provisions on enforcement proceedings as well. The aim is not to make things difficult for the other party, but to make the route to legal redress predictable for both sides.

3. Do not confuse mediation with arbitration

A mediator helps the parties reach an agreement; they do not decide the dispute as a judge would. In arbitration, an arbitrator or arbitral tribunal issues a binding decision. Wording such as “mediation first, then arbitration” therefore involves two distinct stages and cost structures.

Under Article 5/A of the Turkish Commercial Code, applying for mediation before bringing a court action is generally a procedural prerequisite for commercial claims involving a monetary sum, including debt and compensation claims, actions to set aside objections to enforcement, declarations that no debt is owed, and recovery of money paid but not owed. However, there is a statutory exception where an arbitration agreement exists. Have the procedure applicable to your particular claim checked separately.

If arbitration is proposed, look for the following in the draft:

• The institution administering the arbitration or the procedural rules that will apply.
• The seat of arbitration, the language of proceedings and the number of arbitrators.
• How the arbitrators will be appointed.
• Filing fees, advances on costs and the allocation of costs.
• Available routes to urgent legal protection.

Arbitration is not always cheaper or faster. The costs of a sole arbitrator may differ from those of a three-member tribunal. Proceedings in a foreign language may also increase the need for translation. Routes for challenging arbitral awards differ from, and are more limited than, those available for court judgments. Do not assume that the merits of the dispute will be reconsidered in the same way as in an ordinary court appeal.

4. Run through a sample dispute before signing

Test the draft against a practical scenario rather than abstract wording: if a service expressly agreed in the contract is not provided and you want a refund, what is your first step? To whom must you send notice, how long must you wait, and which court or other dispute resolution body must you approach?

If there is a preliminary discussion or settlement stage, specify its duration. Rather than leaving an open-ended clause stating that “the parties shall first seek an amicable solution”, record in writing how discussions will begin and when they will be deemed complete. Do not assume that these discussions automatically suspend limitation periods or other deadlines for bringing a claim.

Check notice addresses, electronic communication methods and authority to act on behalf of each party. Some commercial notices are subject to specific formal requirements, so do not assume that an ordinary email is sufficient for every purpose. Have the clause reviewed to ensure that any requirement for preliminary discussions does not delay access to legal protection when urgent interim relief is needed.

Finally, ask your lawyer for a short assessment setting out likely initial costs, procedural steps and where the judgment or award will need to be enforced. Practical takeaway: Accept the dispute resolution clause only once you can explain where, through which procedure and at what potential cost you would enforce your rights. Resolve any uncertainties before signing.