Mediation in Franchise and Distribution Agreement Disputes in Turkey

Introduction

Mediation in franchise and distribution agreement disputes in Turkey offers franchisors, franchisees, manufacturers, suppliers, distributors, dealers and commercial agents a confidential and flexible method of resolving disagreements arising from long-term commercial relationships.

Franchise and distribution agreements are generally designed to continue for several years. The parties often make substantial investments in premises, personnel, stock, advertising, logistics, software systems, licences and customer development. When the relationship deteriorates, the dispute may affect not only unpaid invoices but also trademarks, territories, customer data, remaining inventory, non-compete obligations, confidential information and the future operation of the business.

Common franchise and distribution disputes in Turkey include:

• Unpaid franchise fees or royalties;
• Unpaid purchase prices;
• Failure to meet minimum sales targets;
• Breach of territorial exclusivity;
• Online sales into an exclusive territory;
• Unauthorised use of trademarks;
• Failure to comply with brand standards;
• Defective or delayed products;
• Unlawful termination;
• Failure to renew the agreement;
• Stock repurchase disputes;
• Customer compensation claims;
• Post-contractual non-compete obligations;
• Transfer of the franchise business;
• Return of equipment, signs and confidential information;
• Claims for damages and lost profits.

These disputes are rarely limited to a single monetary demand. A franchisor may seek unpaid royalties, termination of trademark use and return of operating manuals. A franchisee may claim that the franchisor failed to provide training, advertising support or an exclusive territory. A distributor may allege that the supplier sold directly to major customers, while the supplier may argue that the distributor failed to achieve agreed sales targets.

Court proceedings may determine whether a contract was breached and whether compensation is payable. However, a court judgment may not provide the complete commercial restructuring required by the parties. Mediation allows them to negotiate solutions such as a revised territory, reduced minimum-purchase commitments, a temporary royalty discount, an orderly exit, repurchase of stock, a rebranding period or replacement of the distributor.

The principal legislation governing mediation in Turkey is Law No. 6325 on Mediation in Civil Disputes. It applies to private-law disputes, including disputes involving a foreign element, where the parties are free to dispose of the subject matter. The law regulates confidentiality, party equality, the evidentiary protection of mediation communications and the legal effect of settlement agreements.

Franchise and distribution disputes may also raise issues under the Turkish Code of Obligations, the Turkish Commercial Code, industrial property law and competition law. Vertical commercial relationships are particularly relevant under the Competition Authority’s Block Exemption Communiqué No. 2002/2 on Vertical Agreements and the accompanying Vertical Agreements Guidelines.

This article explains mediation in franchise and distribution agreement disputes in Turkey, including mandatory commercial mediation, termination, exclusivity, pricing, sales targets, trademark use, competition restrictions, stock repurchase, compensation, settlement drafting and enforcement.

What Is a Franchise Agreement?

A franchise agreement is a continuing commercial arrangement under which one party, commonly referred to as the franchisor, permits another party, the franchisee, to operate a business using a commercial system associated with the franchisor’s brand, know-how and business model.

A franchise relationship may include:

• Use of trademarks and logos;
• Business methods;
• Operating manuals;
• Training;
• Advertising support;
• Software systems;
• Supply obligations;
• Store design;
• Quality standards;
• Territorial rights;
• Royalty payments;
• Initial franchise fees;
• Marketing contributions;
• Reporting and inspection rights.

Turkish law does not regulate every franchise relationship through one single comprehensive franchise statute. Franchise agreements are generally treated as mixed and atypical contracts. Their interpretation may involve several areas of law, including contract, commercial, agency, intellectual property and competition law.

The actual content of the relationship is more important than the title given to the agreement.

A contract called a “licence agreement” may in practice contain a complete franchise structure. Similarly, an agreement called a “dealership agreement” may include significant brand-control and business-format obligations.

What Is a Distribution Agreement?

A distribution agreement is a continuing commercial relationship under which a distributor purchases products from a supplier or manufacturer and resells them in its own name and for its own account.

The distributor is generally an independent commercial enterprise rather than an employee, branch or direct representative of the supplier.

A distribution agreement may regulate:

• Territory;
• Product range;
• Minimum purchases;
• Sales targets;
• Pricing recommendations;
• Marketing;
• Inventory;
• Customer service;
• Technical support;
• Exclusivity;
• Online sales;
• Reporting;
• Duration;
• Termination;
• Post-contractual obligations.

Distribution structures may be:

• Exclusive;
• Selective;
• Non-exclusive;
• Sole distribution;
• Territory-based;
• Customer-group based;
• Product-based;
• Multi-channel.

A distributor should be distinguished from a commercial agent. A distributor purchases and resells products, while an agent ordinarily negotiates or concludes transactions on behalf of the principal within the scope of the agency relationship.

This distinction may affect compensation, customer-indemnity arguments, risk allocation and the applicable contractual rules.

Why Franchise and Distribution Disputes Are Complex

Franchise and distribution disputes are difficult because the relationship usually combines several connected obligations.

A franchisee may be required to:

• Pay royalties;
• Purchase products from approved suppliers;
• Maintain brand standards;
• use designated software;
• follow pricing campaigns;
• protect confidential information;
• meet performance targets.

The franchisor may be required to:

• Permit trademark use;
• Provide training;
• transfer know-how;
• supply products;
• offer continuing support;
• protect the franchise territory;
• conduct national advertising;
• update the commercial system.

Likewise, a distributor may be required to maintain stock and achieve sales targets, while the supplier may be required to supply products, preserve exclusivity and provide technical support.

A dispute over termination may therefore depend on numerous questions:

• Was there a material breach?
• Was notice required?
• Was a cure period granted?
• Were sales targets reasonable?
• Did the supplier create the shortfall?
• Was the territory genuinely exclusive?
• Did online sales violate exclusivity?
• Was the non-compete clause lawful?
• Must the supplier repurchase stock?
• Can the former distributor continue selling remaining products?

Mediation allows the parties to address these issues in one coordinated process.

Is Mediation Suitable for Franchise and Distribution Disputes?

Most private contractual disputes arising from franchise and distribution relationships are suitable for mediation.

The parties may negotiate:

• Payment of royalties;
• Outstanding invoices;
• Compensation;
• Revised commercial targets;
• New territories;
• Product returns;
• Transfer of the franchise;
• Withdrawal from certain markets;
• Rebranding;
• Confidentiality;
• Trademark licences;
• Release from guarantees;
• Termination timetable;
• Customer transition;
• Settlement of pending enforcement proceedings.

However, mediation cannot validate an arrangement that violates mandatory law.

The parties cannot lawfully agree to:

• Fix resale prices contrary to competition rules;
• Eliminate regulatory obligations;
• Bind third parties who did not participate;
• prevent public authorities from investigating unlawful conduct;
• transfer registered rights without completing required procedures;
• continue deceptive use of a trademark;
• conceal fraud or criminal activity.

A settlement must therefore be reviewed not only as a contract but also in light of competition, intellectual property, consumer and regulatory law.

Is Mediation Mandatory?

Mediation is not mandatory in every franchise or distribution dispute. The answer depends on the nature of the lawsuit and the relief requested.

Most franchise and distribution relationships are commercial in nature. Where the intended commercial lawsuit seeks payment of money, compensation, annulment of an enforcement objection, a negative declaration or restitution, mediation may be a condition of action.

The Ministry of Justice’s official commercial mediation materials explain the pre-litigation mediation requirement for covered commercial monetary and compensation claims.

Mandatory mediation may apply to claims such as:

• Unpaid franchise fees;
• Unpaid royalties;
• Unpaid product invoices;
• Contractual penalties;
• Compensation for wrongful termination;
• Lost-profit claims;
• Reimbursement of advertising contributions;
• Return of deposits;
• Annulment of an objection to enforcement;
• Negative declaratory claims concerning alleged franchise debt;
• Restitution of payments made without legal basis.

Applications are generally made to courthouse mediation offices. Where no separate mediation office exists, the designated civil court registry performs the relevant functions.

If no agreement is reached, the mediator prepares a final report. The claimant must then proceed in accordance with the mandatory-mediation rules and applicable filing deadlines.

Voluntary Mediation

Even where no statutory condition of action applies, the parties may initiate voluntary mediation.

Voluntary mediation may be particularly useful where the dispute concerns:

• Future territory;
• Renewal;
• Transfer of a franchise;
• Rebranding;
• Changes to the distribution model;
• Withdrawal from online channels;
• Product transition;
• New sales targets;
• Change from exclusive to non-exclusive distribution;
• Replacement of the franchisee or distributor;
• Continuation of trademark use for a limited period.

The parties may also mediate during pending litigation, arbitration or enforcement proceedings.

The existence of an arbitration clause does not prevent the parties from reaching a mediated settlement.

Mixed Monetary and Non-Monetary Claims

A franchise dispute may contain both monetary and non-monetary claims.

For example, the franchisor may seek:

• Unpaid royalties;
• A contractual penalty;
• Cessation of trademark use;
• Return of equipment;
• Deletion of confidential information.

The monetary claims may fall within mandatory commercial mediation, while requests involving injunctions, return of property or trademark use require separate procedural analysis.

A careful mediation application should identify all connected issues without creating uncertainty over whether the statutory condition of action has been satisfied for each later claim.

Unpaid Franchise Fees and Royalties

Franchisees may be required to pay:

• Initial franchise fee;
• Periodic royalty;
• Turnover-based royalty;
• Marketing contribution;
• Training fee;
• Software fee;
• Supply-related fee;
• Renewal fee.

Disputes may arise over:

• Calculation basis;
• Reported turnover;
• Discounts;
• Online sales;
• VAT;
• Currency;
• Interest;
• Set-off;
• Support allegedly not provided by the franchisor.

The franchisee may argue that royalties should be reduced because the franchisor failed to deliver promised services. The franchisor may respond that support obligations are independent from the payment obligation.

Mediation may produce:

• Financial reconciliation;
• Partial payment;
• Instalments;
• Temporary royalty reduction;
• Future reporting mechanism;
• Independent audit;
• Waiver of part of the interest;
• Conditional continuation of the franchise.

Unpaid Product Invoices

Distribution disputes frequently begin with unpaid product invoices.

The supplier may claim the full invoice amount, interest and enforcement costs.

The distributor may raise defences such as:

• Defective products;
• Undelivered goods;
• Incorrect quantity;
• Unauthorised price increase;
• Return of unsold stock;
• Marketing support owed by the supplier;
• Contractual rebates;
• Set-off based on damages;
• Breach of exclusivity.

A settlement should reconcile:

• Each invoice;
• Credit notes;
• Returns;
• Rebates;
• commissions;
• interest;
• prior payments;
• stock in transit;
• disputed products.

A general statement that the “account is settled” may not be sufficient where several invoices and deductions are involved.

Minimum Purchase and Sales Target Disputes

Franchise and distribution agreements commonly impose minimum purchase or sales targets.

The supplier or franchisor may argue that the other party failed to develop the market. The distributor or franchisee may respond that the target became impossible or commercially unreasonable because of:

• Supply shortages;
• Price increases;
• economic conditions;
• regulatory changes;
• competing direct sales;
• lack of marketing support;
• product defects;
• delayed delivery;
• territory reduction;
• exchange-rate changes.

Mediation may result in:

• Revised target;
• Temporary suspension;
• product-specific target;
• staged performance plan;
• reduction of territory;
• conversion to non-exclusive status;
• additional marketing support;
• orderly termination.

Targets should be evaluated together with the supplier’s own performance.

A party should not be blamed for failing to sell products that were not supplied on time or were priced uncompetitively because of unilateral conduct.

Territorial Exclusivity

Exclusive territory is often one of the distributor’s or franchisee’s most valuable contractual rights.

Disputes may arise where the supplier:

• Appoints another distributor;
• Opens a company-owned outlet;
• sells directly to key customers;
• permits cross-border sales;
• sells through online marketplaces;
• supplies national accounts;
• allows other franchisees to target the area.

The agreement should be examined carefully to determine whether exclusivity applies to:

• Active sales;
• Passive sales;
• physical stores;
• online sales;
• customer categories;
• public tenders;
• national accounts;
• wholesale sales;
• specific products.

The difference between active and passive sales is particularly important under competition law.

A private agreement cannot automatically prohibit every form of cross-territorial sale if the restriction is incompatible with competition rules.

Online Sales and Digital Channels

Traditional franchise and distribution agreements may not clearly regulate e-commerce.

Disputes may concern:

• Supplier’s own website;
• franchisee websites;
• online marketplaces;
• social-media sales;
• delivery into another territory;
• digital advertising;
• use of trademarks in search advertising;
• platform pricing;
• customer data.

Mediation may establish an online-sales protocol dealing with:

• Approved platforms;
• geographic targeting;
• fulfilment;
• delivery zones;
• customer ownership;
• digital advertising;
• pricing autonomy;
• marketplace standards;
• returns;
• service obligations.

The parties should ensure that the resulting restrictions remain compatible with competition law.

Resale Price Restrictions

Suppliers and franchisors often wish to maintain a consistent brand position. However, imposing fixed or minimum resale prices may create serious competition-law risks.

The Competition Authority’s vertical agreements framework distinguishes permissible recommendations or maximum prices from restrictions that effectively eliminate the buyer’s ability to determine its resale price. The Block Exemption Communiqué and Vertical Agreements Guidelines are central sources for assessing vertical restraints.

A franchise settlement should therefore avoid provisions that unlawfully require:

• Fixed resale price;
• minimum resale price;
• indirect price fixing through penalties;
• withdrawal of discounts for lower pricing;
• coordinated retail prices.

The parties may discuss recommended prices, marketing campaigns or maximum prices only within the limits of competition law.

A mediated settlement is not protected from regulatory scrutiny merely because it was reached confidentially.

Exclusive Supply Obligations

A franchisee may be required to purchase products, ingredients, equipment or services only from the franchisor or approved suppliers.

Such restrictions may be justified by:

• Quality control;
• brand consistency;
• product safety;
• protection of know-how;
• uniform customer experience.

However, broad or long-term exclusive purchasing obligations may raise competition-law questions depending on market shares, duration and commercial effect.

The 2002/2 Block Exemption Communiqué regulates the conditions under which certain vertical agreements may benefit from group exemption. Following the 2021 amendment, the supplier’s relevant market share threshold in the framework was reduced to 30 percent.

A settlement should not automatically continue every exclusivity clause without reviewing whether:

• The clause remains necessary;
• Duration is proportionate;
• Market conditions have changed;
• The relationship qualifies for exemption;
• Individual exemption analysis is required.

Non-Compete Obligations

Franchise and distribution agreements may contain non-compete obligations during and after the contractual relationship.

During the agreement, the franchisee or distributor may be restricted from selling competing products or operating a competing business.

After termination, the agreement may attempt to restrict competition for a specified period and territory.

Competition-law analysis is essential.

Under the vertical agreements framework, non-compete obligations are subject to limitations concerning duration, territory and relationship to the premises or know-how involved. Post-contractual restrictions are not automatically enforceable merely because they appear in the contract.

A mediated non-compete clause should be:

• Limited in duration;
• Limited geographically;
• Limited to relevant products or services;
• Necessary to protect legitimate know-how;
• Compatible with mandatory competition rules;
• Proportionate to the commercial interest protected.

An excessively broad provision may be invalid or expose the parties to regulatory risk.

Trademark and Brand-Use Disputes

The franchisee usually obtains a limited right to use the franchisor’s trademarks during the agreement.

Disputes may arise from:

• Use outside the authorised territory;
• unauthorised sub-franchising;
• modified logos;
• use after termination;
• registration of similar marks;
• registration of domain names;
• social-media accounts;
• poor-quality products;
• unauthorised advertising.

After termination, the settlement should regulate:

• removal of signs;
• removal of logos from premises;
• website changes;
• domain-name transfer;
• social-media usernames;
• return of branded materials;
• remaining packaging;
• customer communication;
• transition period.

A vague obligation to “stop using the brand” may be difficult to implement.

The settlement should list the exact channels and materials covered.

Know-How and Confidential Information

A franchise system commonly includes confidential know-how such as:

• Operating manuals;
• recipes;
• pricing models;
• software;
• supplier lists;
• marketing plans;
• customer data;
• training materials;
• store design;
• commercial methods.

The franchisee may be required to return or destroy confidential materials after termination.

A mediated settlement may include:

• deletion of digital files;
• return of manuals;
• independent forensic verification;
• certification of deletion;
• restrictions on disclosure;
• protection of employee and customer data;
• contractual penalties;
• permitted retention for legal compliance.

Confidentiality should be defined precisely.

Information already public or independently developed should not automatically be treated in the same way as protected proprietary know-how.

Failure to Provide Support

Franchisees often claim that the franchisor failed to provide promised support.

Allegations may include:

• Inadequate initial training;
• no continuing training;
• delayed store opening;
• unsuitable location approval;
• lack of national advertising;
• software failures;
• supply problems;
• failure to update the business system;
• no operational assistance.

The franchisor may respond that the franchisee:

• did not follow instructions;
• failed to employ qualified staff;
• underfunded the business;
• failed to attend training;
• ignored marketing requirements;
• did not report operational problems.

Mediation may allow the parties to agree on a remedial programme rather than terminate immediately.

The programme may include:

• additional training;
• operational audit;
• revised business plan;
• temporary fee reduction;
• store renovation;
• local marketing budget;
• performance milestones;
• termination if milestones are not achieved.

Quality-Control Disputes

Franchisors have a legitimate interest in protecting brand quality.

A franchise agreement may permit:

• inspections;
• mystery shopping;
• audit of products;
• review of hygiene;
• examination of customer service;
• software monitoring;
• compliance notices.

Disputes may arise where the franchisee claims that:

• inspections were arbitrary;
• standards changed without notice;
• termination was disproportionate;
• other franchisees were treated differently;
• corrective periods were insufficient.

Mediation may establish:

• objective inspection criteria;
• cure period;
• independent inspection;
• retraining;
• staged sanctions;
• final review.

Quality-control obligations should remain commercially objective and legally proportionate.

Advertising and Marketing Contributions

A franchisee may contribute to a national or regional advertising fund.

Disputes may concern:

• Amount collected;
• use of funds;
• transparency;
• local benefit;
• digital marketing;
• unauthorised deductions;
• accounting;
• continuation after termination.

The parties may agree on:

• independent reporting;
• annual budget;
• permitted categories;
• local advertising credit;
• refund or set-off;
• audit access.

A settlement should distinguish between unpaid contractual contributions and allegations that the fund was not used properly.

Product Defects and Supply Problems

A distributor may claim that supplied products were:

• Defective;
• expired;
• damaged;
• non-compliant;
• incorrectly labelled;
• delivered late;
• unsuitable for the market.

The supplier may argue that:

• The distributor stored products incorrectly;
• damage occurred during transport;
• complaints were late;
• resale conditions caused the defect;
• the products complied with specifications.

Mediation may use an independent technical expert to determine:

• Defect;
• cause;
• affected quantity;
• replacement cost;
• recall procedure;
• customer compensation;
• stock treatment.

Termination of Franchise Agreements

Termination is one of the most disputed areas of franchise law.

The agreement may be terminated because of:

• Non-payment;
• repeated quality violations;
• unauthorised trademark use;
• breach of non-compete;
• insolvency;
• failure to meet targets;
• abandonment;
• unauthorised transfer;
• confidentiality breach;
• serious reputational harm.

The validity of termination may depend on:

• Contractual grounds;
• materiality of breach;
• notice;
• cure period;
• good faith;
• proportionality;
• previous acceptance of the conduct;
• duration of the relationship.

A party should not assume that every contractual breach automatically justifies immediate termination.

Mediation may result in:

• continuation subject to conditions;
• mutual termination;
• termination on a future date;
• transfer to a new franchisee;
• payment of outstanding debt;
• rebranding period;
• stock repurchase;
• release of guarantees.

Termination of Distribution Agreements

Distribution agreements may be fixed-term or indefinite-term.

Disputes may concern:

• Whether ordinary termination was permitted;
• notice period;
• serious cause;
• compensation;
• stock;
• customer base;
• investments made in reliance on the relationship;
• exclusivity;
• post-contractual competition.

An indefinite distribution relationship may require reasonable notice depending on the contract and circumstances.

A sudden termination after the distributor made substantial market-specific investments may lead to damages arguments.

Mediation allows the parties to negotiate an exit period during which:

• existing orders are completed;
• customers are transferred;
• stock is sold;
• payments are collected;
• branding is removed;
• the replacement distributor is introduced.

Wrongful Termination Claims

A party alleging wrongful termination may seek:

• Lost profit;
• unrecovered investment;
• goodwill loss;
• stock loss;
• employee-related costs;
• lease costs;
• contractual penalty;
• customer compensation.

The opposing party may argue that:

• Termination was justified;
• losses were avoidable;
• projected profit is speculative;
• the claimant failed to mitigate;
• the contractual limitation clause applies;
• the business was already unprofitable.

Mediation may resolve these uncertainties through a structured exit payment rather than a contested expert calculation.

Customer Compensation and Goodwill Claims

Commercial agents are expressly regulated under the Turkish Commercial Code, including circumstances in which customer compensation may arise after termination.

Franchisees and distributors are not automatically commercial agents. However, in some cases, parties may argue by analogy or according to the specific relationship that compensation should be paid for customers introduced to the supplier.

The analysis may consider:

• Whether the distributor created a lasting customer base;
• whether the supplier continues benefiting;
• whether the distributor loses future income;
• whether the claim is equitable;
• whether the relationship resembles agency;
• whether the contract validly addresses compensation.

The legal position is highly fact-specific.

Mediation may be especially suitable because the parties can agree on a commercially reasonable goodwill payment without obtaining a final judicial determination on legal classification.

Failure to Renew

A franchisee may expect renewal after a successful contractual period, while the franchisor may choose another operator or change the business model.

The dispute may concern:

• Renewal conditions;
• notice;
• performance;
• investments required shortly before expiry;
• legitimate expectation;
• discrimination;
• territorial reassignment.

A fixed-term contract does not automatically create an unlimited right to renewal.

However, the conduct of the parties, renewal clauses and investments may affect claims.

Mediation may provide:

• Short extension;
• reduced renewal fee;
• transfer of the business;
• compensation for recent investment;
• rebranding support;
• orderly departure.

Transfer of the Franchise or Distribution Business

The franchisee or distributor may wish to sell its business to a third party.

The agreement may require consent.

Disputes may arise where consent is withheld because of:

• Financial capacity;
• operational experience;
• brand suitability;
• unpaid debt;
• competition concerns;
• proposed ownership.

A settlement may regulate:

• Approval criteria;
• training of the buyer;
• transfer fee;
• payment of old debts;
• release of the seller;
• new guarantee;
• transfer date;
• stock and equipment;
• lease assignment.

The franchisor’s consent should not be described vaguely. Objective completion conditions should be listed.

Stock Repurchase

After termination, the franchisee or distributor may hold unsold stock.

The parties may disagree over whether the supplier must repurchase:

• Current products;
• obsolete products;
• seasonal goods;
• damaged goods;
• customised packaging;
• spare parts;
• promotional products.

A stock settlement should identify:

• Product codes;
• quantities;
• condition;
• expiry dates;
• purchase price;
• repurchase discount;
• transport;
• inspection;
• payment date;
• tax documents.

The parties should also determine whether the distributor may sell existing stock during a transition period.

Equipment, Fixtures and Signage

Franchise premises may contain:

• Branded signs;
• furniture;
• machinery;
• software terminals;
• uniforms;
• display materials;
• security systems;
• leased equipment.

The settlement should determine:

• Ownership;
• return;
• purchase;
• removal;
• repair of the premises;
• transport;
• data deletion;
• deadline.

A detailed inventory should be attached.

Employee and Premises Issues

Termination of the commercial relationship may affect:

• Employees;
• leases;
• local permits;
• utilities;
• licences;
• customer deposits;
• supplier contracts.

The franchisor is not automatically responsible for the franchisee’s employees or lease merely because the business uses the franchisor’s brand.

A mediated settlement should avoid creating unintended employment or rental obligations.

It may nevertheless regulate:

• Transfer of certain employees;
• introduction to replacement operator;
• assumption of lease;
• payment of transition support;
• customer notifications.

Competition Law in Franchise and Distribution Settlements

Competition law is central to franchise and distribution relationships because these agreements regulate different levels of the supply chain.

The 2002/2 Block Exemption Communiqué applies to qualifying vertical agreements, while the Vertical Agreements Guidelines explain issues including resale prices, territorial restrictions, non-compete obligations and online sales.

The parties should review whether a proposed settlement contains:

• Resale price maintenance;
• market sharing;
• restriction of passive sales;
• excessive non-compete;
• customer allocation;
• online-sales prohibition;
• exclusive purchasing;
• information exchange affecting competition.

A settlement may resolve the civil dispute but still attract competition-law consequences if it contains unlawful restrictions.

The Competition Authority may also withdraw the benefit of a block exemption where the agreement produces effects incompatible with exemption conditions, as illustrated by its published enforcement practice.

Preparing for Mediation

The parties should prepare a complete contractual and financial file.

Relevant documents may include:

• Franchise or distribution agreement;
• amendments;
• operating manuals;
• licence documents;
• invoices;
• royalty reports;
• turnover records;
• audit reports;
• warning notices;
• termination notice;
• sales data;
• territory maps;
• online-sales records;
• advertising records;
• stock inventory;
• guarantees;
• lease and equipment documents;
• trademark registrations;
• customer correspondence;
• competition-law analysis.

Each party should prepare:

• Main legal position;
• financial calculation;
• evidence;
• commercial objective;
• acceptable settlement range;
• alternative if no agreement is reached.

Multi-Party Mediation

Franchise and distribution disputes may involve more than two parties.

Potential participants include:

• Franchisor;
• franchisee;
• master franchisee;
• supplier;
• distributor;
• guarantor;
• trademark owner;
• property owner;
• financing bank;
• affiliated company;
• replacement operator.

A franchisor may license a brand owned by another group company. A distributor’s obligations may be guaranteed by its shareholder. A master franchisee may be responsible for sub-franchisees.

The correct parties must be identified before settlement.

One company cannot release or transfer a right belonging to another group company without authority.

Confidentiality

Franchise and distribution disputes may expose sensitive information such as:

• Turnover;
• royalty rates;
• customer lists;
• supplier prices;
• operating manuals;
• recipes;
• business plans;
• market-entry strategies;
• settlement amounts;
• product margins.

Law No. 6325 imposes confidentiality obligations on the mediator and participants unless otherwise agreed within legal limits. It also protects specified statements and documents created for mediation from later evidentiary use.

A separate confidentiality protocol may regulate:

• Data-room access;
• financial documents;
• expert reports;
• customer information;
• disclosure to auditors or lenders;
• public announcements;
• return or destruction of documents.

The confidentiality clause should permit disclosures required for implementation, enforcement, tax, regulatory compliance or legal advice.

Interim Measures and Evidence Preservation

Mediation does not automatically prevent:

• Continued trademark use;
• sale of stock;
• deletion of online records;
• transfer of a domain name;
• collection under a guarantee;
• enforcement proceedings;
• disclosure of confidential information.

A party may therefore need to seek:

• Preliminary injunction;
• evidence determination;
• interim attachment;
• preservation of electronic data;
• temporary cessation of brand use;
• protection of customer records.

The parties may also sign a temporary standstill agreement during mediation.

The standstill may regulate:

• Suspension of termination;
• continued supply;
• temporary payment;
• no new franchise appointments;
• preservation of stock;
• no deletion of data;
• continued customer service.

Settlement Structures

Franchise and distribution mediation may produce several forms of solution.

Continuation With Revised Terms

The parties continue the relationship but amend targets, territory, fees or support obligations.

Probationary Continuation

The contract remains in force for a defined period subject to measurable performance conditions.

Mutual Termination

The parties agree on an orderly exit without admitting breach.

Transfer to a New Operator

The franchise or distribution business is transferred to an approved third party.

Conversion of Relationship

Exclusive distribution may become non-exclusive, or franchise operations may convert into ordinary dealership.

Territory Adjustment

Territories may be divided, reduced or expanded.

Financial Settlement

Outstanding royalties, invoices and compensation claims are settled without continuing the relationship.

Licence Arrangement

The former franchisee may receive a limited licence to sell remaining stock or complete a transition.

Drafting the Settlement Agreement

A franchise or distribution mediation settlement should identify:

• Full legal names;
• agreement date;
• products or services;
• territory;
• trademarks;
• outstanding payments;
• continuation or termination;
• stock;
• equipment;
• confidential information;
• customer data;
• online accounts;
• non-compete;
• guarantees;
• pending proceedings;
• costs;
• default;
• enforcement.

Financial Reconciliation

The settlement should provide a clear account of:

• Unpaid invoices;
• franchise fees;
• royalties;
• advertising contributions;
• interest;
• rebates;
• returns;
• deposits;
• contractual penalties;
• prior payments;
• amount waived;
• final balance.

A schedule should be attached where the account is complex.

Instalments and Default

If payment will be made by instalments, the agreement should state:

• Each instalment;
• exact due date;
• currency;
• payment account;
• grace period;
• default interest;
• acceleration;
• effect on settlement discount;
• security;
• enforcement costs.

The parties should also determine whether the original claim revives after default or whether only the settlement balance remains payable.

Conditional Release

An immediate unconditional release may expose a creditor where payment is deferred.

The agreement may provide that:

• Release becomes effective after full payment;
• trademark licence ends after payment or termination date;
• enforcement is withdrawn after the final instalment;
• guarantees remain until performance;
• stock transfer occurs against payment.

The sequence of performance should be clear.

Termination and Transition Plan

An exit settlement should include a timetable for:

• Final operating date;
• cessation of new orders;
• completion of existing customer orders;
• removal of signs;
• domain transfer;
• social-media changes;
• stock sale or return;
• equipment return;
• data deletion;
• customer notice;
• employee and lease arrangements.

Each obligation should have a responsible party and completion date.

Trademark and Digital Assets

The settlement should identify:

• Trademark registrations;
• trade names;
• domain names;
• social-media accounts;
• telephone numbers;
• email addresses;
• marketplace seller accounts;
• advertising accounts;
• customer databases.

It should specify which assets are:

• Returned;
• transferred;
• deleted;
• retained;
• used temporarily.

The former franchisee should not be left with brand-associated online assets after the agreed termination date unless expressly authorised.

Non-Compete and Non-Solicitation

A settlement may contain restrictions concerning:

• Competing business;
• customers;
• employees;
• suppliers;
• use of know-how.

The clause should specify:

• Duration;
• territory;
• activities;
• products;
• protected interests;
• contractual consequence.

It must also be compatible with competition law and general principles of proportionality.

Stock and Product Transition

A stock appendix should list:

• Product code;
• quantity;
• condition;
• expiry date;
• purchase price;
• repurchase price;
• transport;
• inspection date;
• tax invoice.

The parties should state whether the distributor may continue sales during a defined period and under which branding conditions.

Pending Lawsuits and Enforcement Proceedings

The settlement should identify:

• Court;
• case number;
• arbitration;
• enforcement office;
• file number;
• attachments;
• guarantees;
• interim measures.

It should state:

• Which proceedings will be withdrawn;
• when withdrawal will occur;
• who pays costs;
• whether attachments remain until payment;
• whether objections will be withdrawn;
• whether interim measures will be lifted.

The creditor should not release security before receiving agreed performance unless that result is intended.

Enforceability of the Settlement

A valid mediation agreement is binding within its defined scope.

Law No. 6325 provides that matters settled through mediation generally cannot be litigated again. Depending on the subject matter and the statutory signature structure, the agreement may qualify as a judgment-equivalent document without a separate enforceability annotation, or the parties may apply for an annotation where required.

The obligations must be sufficiently clear for compulsory enforcement.

A clause requiring payment of TRY 1,000,000 on a specified date is more readily enforceable than a statement that the franchisor will provide “reasonable future support.”

Non-monetary obligations should therefore be objective and measurable.

What Happens If Mediation Fails?

If mediation ends without agreement, the parties may pursue:

• Commercial receivable action;
• compensation claim;
• annulment-of-objection action;
• negative declaratory action;
• trademark infringement action;
• preliminary injunction;
• arbitration;
• enforcement proceeding;
• competition-law complaint;
• another appropriate remedy.

Where mediation was mandatory, the claimant must obtain and submit the final non-agreement report according to the statutory procedure.

Arbitration Clauses

International and high-value franchise and distribution agreements frequently contain arbitration clauses.

The clause may provide for:

• Institutional arbitration;
• ad hoc arbitration;
• foreign seat;
• Turkish seat;
• multi-stage negotiation and mediation;
• emergency measures.

Mediation may still be used before or during arbitration.

The parties should protect:

• Arbitration limitation periods;
• appointment deadlines;
• interim-measure rights;
• confidentiality;
• jurisdictional objections.

A mediated settlement may be recorded in a consent award where appropriate and agreed.

Foreign Franchisors and Distributors

Foreign businesses frequently use franchise and distribution structures to enter the Turkish market.

Cross-border disputes may involve:

• Foreign trademarks;
• master franchise structures;
• international product supply;
• foreign-currency royalties;
• transfer pricing;
• withholding tax;
• arbitration;
• guarantees;
• international data flows.

The settlement should address:

• Governing law;
• jurisdiction or arbitration;
• controlling language;
• currency;
• exchange rate;
• tax;
• bank charges;
• corporate authority;
• apostille and translation;
• cross-border enforcement.

Law No. 6325 applies to eligible private-law disputes involving a foreign element.

A foreign parent company should not be treated automatically as liable for a Turkish subsidiary’s obligations unless the contractual or legal basis exists.

Common Mistakes in Franchise and Distribution Mediation

Treating the Dispute Only as an Unpaid Debt

Territory, stock, branding and customer transition may be equally important.

Failing to Examine Competition Law

The settlement itself may contain unlawful vertical restrictions.

Using Vague Territory Language

The agreement should address online, active, passive and key-account sales.

Fixing Resale Prices

A mediated clause may still violate competition law.

Ignoring Remaining Stock

The former distributor may continue selling or suffer significant loss.

Releasing Claims Before Payment

A conditional release may provide better protection.

Forgetting Trademarks and Digital Accounts

Brand confusion may continue after termination.

Failing to Identify All Contracting Entities

The trademark owner, supplier and franchisor may be different companies.

Using an Excessive Non-Compete Clause

The restriction may be unenforceable or unlawful.

Withdrawing Proceedings Too Early

The claimant may lose attachments or interim protection.

Ignoring Guarantees and Security

Shareholders or banks may remain liable after the commercial relationship ends.

Practical Checklist

Before signing a settlement, the parties should confirm:

• Correct legal entities;
• franchise or distribution agreement;
• amendments;
• territory;
• products and services;
• trademarks;
• outstanding account;
• sales targets;
• exclusivity;
• online sales;
• stock;
• equipment;
• customer data;
• confidentiality;
• non-compete;
• guarantees;
• termination date;
• transition plan;
• pending proceedings;
• payment security;
• default;
• enforceability;
• competition-law compliance.

The Role of a Turkish Franchise and Distribution Lawyer

A Turkish franchise and distribution lawyer may assist by:

• Determining whether mediation is mandatory;
• analysing the contract;
• classifying the relationship;
• calculating claims;
• reviewing termination;
• assessing exclusivity;
• examining competition restrictions;
• protecting trademarks and know-how;
• preparing stock reconciliation;
• negotiating continuation or exit;
• drafting transition obligations;
• coordinating foreign parties;
• protecting interim rights;
• drafting an enforceable settlement;
• filing litigation or arbitration if mediation fails.

The lawyer should combine contract law, commercial law, intellectual property law, competition law and dispute-resolution strategy.

Frequently Asked Questions

Can franchise disputes be mediated in Turkey?

Yes. Private contractual and monetary disputes arising from franchise relationships may generally be mediated.

Is mediation mandatory before every franchise lawsuit?

No. It is generally mandatory for covered commercial monetary and compensation claims. Non-monetary and intellectual property remedies require separate assessment.

Can unpaid franchise royalties be settled through mediation?

Yes. The parties may agree on calculation, instalments, interest, security and continuation of the relationship.

Can a franchisor terminate the agreement during mediation?

The contractual and legal rights of the parties continue unless they sign a standstill or temporary protocol.

Can territorial exclusivity be revised?

Yes. The parties may redefine territory, customer categories and online sales, subject to competition law.

Can the franchisor impose resale prices in the settlement?

Fixed or minimum resale prices may violate competition law. Any pricing clause must be assessed under the vertical agreements rules.

Can a post-contractual non-compete clause be enforced?

It depends on its duration, territory, scope, necessity and compliance with competition and contract law.

Must the supplier repurchase remaining stock?

Not automatically in every case. The contract, termination circumstances, product condition and legal principles must be reviewed.

Can the former franchisee continue using the trademark?

Only within the scope and period expressly authorised. Brand use should normally cease according to the termination and transition plan.

Can a distributor claim compensation for customers it introduced?

Potentially, depending on the nature of the relationship, contractual terms and applicable legal principles. The claim is fact-specific.

Is the settlement confidential?

Yes. Turkish mediation law protects the confidentiality of the process and specified mediation communications.

Is the settlement enforceable?

A valid, precise and properly signed mediation agreement may be enforceable under Law No. 6325.

Conclusion

Mediation in franchise and distribution agreement disputes in Turkey provides a flexible and confidential method for resolving disputes that often involve much more than unpaid money.

These disputes may concern:

• Franchise fees;
• royalties;
• product invoices;
• sales targets;
• territorial exclusivity;
• online sales;
• brand standards;
• trademark use;
• supply failures;
• termination;
• stock;
• customer compensation;
• non-compete obligations;
• guarantees;
• confidential information.

Many monetary franchise and distribution claims fall within mandatory commercial mediation. These may include payment, compensation, restitution, negative declaratory claims and actions relating to objections in enforcement proceedings. The precise procedural position should be determined according to the relief requested.

Mediation is particularly valuable because it permits solutions beyond a conventional court judgment.

The parties may agree on:

• Continuation under revised terms;
• temporary royalty reduction;
• new sales targets;
• modified territory;
• transfer to a new operator;
• conversion from exclusive to non-exclusive distribution;
• stock repurchase;
• staged rebranding;
• mutual termination;
• structured compensation.

Competition law must be considered throughout the process.

A settlement should not impose unlawful resale prices, absolute territorial protection, excessive non-compete obligations or improper restrictions on online and passive sales. The Competition Authority’s Block Exemption Communiqué No. 2002/2 and Vertical Agreements Guidelines are central to this analysis.

A successful settlement should clearly regulate:

• Contract status;
• settlement amount;
• instalments;
• territory;
• customer categories;
• stock;
• equipment;
• trademark use;
• domain names;
• social-media accounts;
• confidential information;
• non-compete;
• guarantees;
• transition;
• pending proceedings;
• default;
• enforceability.

The parties should also distinguish between the rights of the franchisor, trademark owner, supplier and affiliated companies. A settlement signed by one group entity cannot automatically dispose of rights owned by another.

When the commercial relationship ends, the transition plan is as important as the payment clause. Signs must be removed, digital accounts transferred, stock treated, customer communications coordinated and confidential data returned or deleted.

If mediation fails, the parties should proceed promptly with the appropriate litigation, arbitration, enforcement, intellectual property or competition-law remedy. Mandatory mediation reports and limitation periods must be protected.

An experienced Turkish franchise and distribution mediation lawyer can evaluate contractual, financial, intellectual property and competition-law risks and convert the negotiated commercial solution into a clear, lawful and enforceable settlement.

Disclaimer: This article is provided for general informational purposes only and does not constitute legal, financial, tax or competition-law advice. Turkish mediation, commercial, contract, intellectual property and competition rules may change. Each franchise or distribution dispute should be evaluated according to the agreement, parties, market structure, requested remedies and legislation in force on the relevant date.