Franchise pricing: the rules in Colombia

When franchising a business in Colombia, the price list used in company-owned outlets should not automatically become binding on independent operators. Franchisees bear their own costs and risks, and commercial decisions must comply with competition rules. Before offering your first franchise, it is worth designing a pricing and promotions policy that protects the customer experience without turning coordination across the franchise network into an unlawful restriction.

1. Distinguish brand standards from pricing

A business with company-owned outlets can set its prices directly. Bringing in franchisees changes the relationship: you are not simply adding branches, but entering into contracts with independent businesses.

Recipes, presentation, customer service procedures and product specifications can all form part of the franchise model’s standards. Resale pricing requires a different assessment. The need to maintain a consistent brand image does not, in itself, justify imposing retail prices.

Before drafting the agreement, categorise your commercial decisions:

• Product or service standards: what customers should receive and the quality requirements that apply.
• Financial guidance: methods for calculating costs, margins and break-even points.
• Recommended prices: suggested prices that franchisees must be genuinely free to accept or reject.
• Coordinated campaigns: promotions with participation, funding and communication arrangements agreed in advance.

This distinction helps prevent an apparently operational instruction from becoming a binding pricing requirement.

2. Apply Colombian competition rules

In Colombia, franchise agreements are not governed by a comprehensive, dedicated statutory framework. Validly agreed contractual terms, the general rules of the Commercial Code and Civil Code, and other relevant legislation apply. Freedom of contract does not override mandatory legal rules.

Law 155 of 1959, Decree 2153 of 1992 and Law 1340 of 2009, which form part of Colombia’s competition law framework, are particularly relevant to pricing policies. Among other practices, Decree 2153 covers agreements whose purpose or effect is to fix prices directly or indirectly. The Superintendence of Industry and Commerce is the national competition authority.

Imposing resale prices may therefore constitute a restrictive practice. The assessment depends on how the arrangement actually works, not simply on the terminology used in the agreement.

A price described as ‘recommended’ is no longer a genuine recommendation if departing from it leads to penalties, loss of benefits or threats of termination. Nor should franchisee meetings be used as a forum for franchisees to agree among themselves on the prices they will charge.

Before introducing minimum or maximum prices, mandatory price bands or restrictions on discounts, seek specialist legal advice. Do not assume that an arrangement is lawful simply because it appears in other franchise agreements.

3. Design promotions that can run without surprises

Joint campaigns require both commercial and legal planning. Advertising a discount across all outlets without confirming which ones are participating can create commitments that some outlets were not prepared to meet.

Prepare a brief for each campaign setting out:

• The products or services covered and the promotion’s start and end dates.
• Participating outlets and sales channels.
• Participation terms and the deadline for opting in.
• Who will bear the cost of discounts, promotional materials and other expenses.
• Expected availability and any restrictions that must be communicated.
• The procedure for resolving errors at the till or through digital channels.

Law 1480 of 2011, Colombia’s Consumer Protection Statute, also matters: objective, specific terms stated in advertising are binding on the advertiser, and promotions must disclose when, where and how they apply, along with any other applicable requirements. Advertising must reflect what customers will actually find.

If a promotion is available only at selected outlets, make that clear. An internal agreement about who funds the discount does not remedy misleading communications or remove legal responsibilities towards customers.

4. Align the agreement, systems and day-to-day conduct

The policy must extend beyond a contractual clause. Check whether the point-of-sale system allows franchisees to manage prices in line with the agreed arrangement. An agreement that refers to recommendations is undermined if the platform prevents any price changes.

Document who enters prices, who authorises technical changes and how participation in campaigns is recorded. Train the franchise support team too: quality assessments must not be used to penalise pricing decisions that are for the franchisee to make.

Avoid circulating individual franchisees’ future pricing or discount plans among the network. To support business management, prioritise costing tools and one-to-one advice without facilitating agreements between independent operators.

Practical conclusion: before franchising, review the agreement, advertising and point-of-sale system together. All three should reflect a coherent, transparent commercial policy that complies with competition rules.