Buying a franchise: who sets selling prices in Croatia?

A recognisable brand and network-wide promotions can attract customers, but they do not guarantee that every sale will be profitable. Before joining a franchise network, check whether you can set your own selling prices and refuse discounts that leave your costs uncovered. These questions go beyond the price list: the agreement, operations manual, promotion rules and till system settings all matter.

1. Distinguish recommended prices from mandatory prices

A franchisor may want a consistent market message, but a franchisee is generally an independent business owner who bears their own costs and business risks. A consistent look across outlets therefore does not give the franchisor an unrestricted right to dictate the price of every sale.

When comparing brands, ask for specific answers to four questions:

• Are prices recommended, maximum or mandatory?
• Can you offer a product or service at a lower price without prior approval?
• Can you adjust prices to reflect local costs and demand?
• Are there consequences if you do not adopt the recommended price list?

What matters is not the document’s title, but what happens in practice. A price list labelled “recommended” is not genuinely optional if departing from it triggers threats of termination, the withdrawal of benefits or a system block.

Ask the franchisor to demonstrate how a franchisee changes a price at the till. If only head office can make the change, ask whether there is a process for implementing your own pricing decision, rather than simply requesting an exception. A technical restriction can reveal more than a general contractual statement about independence.

2. Understand the Croatian and European legal framework

Croatia has neither a specific franchise law nor a mandatory standardised pre-contractual disclosure document specifically for franchises. The contractual relationship rests primarily on the Croatian Civil Obligations Act, including the principles of good faith and fair dealing and the general rules on negotiations and liability. The franchise register maintained by the Croatian Chamber of Economy (HGK) is neither a licence to operate nor confirmation that a particular agreement is lawful.

The Croatian Competition Act is particularly important for pricing. Where the relationship may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union is also relevant. Commission Regulation (EU) 2022/720 and the Guidelines on Vertical Restraints are important when assessing vertical agreements, including relevant franchise arrangements.

Imposing fixed or minimum resale prices generally constitutes a hardcore restriction of competition. Recommended and maximum prices may be permitted, but pressure or incentives must not turn them into fixed or minimum prices. Protecting the brand does not, in itself, justify imposing such prices.

The assessment nevertheless depends on the substance of the relationship and the circumstances. Pay particular attention to time-limited network-wide promotions and arrangements in which the franchisor claims that you act as its agent. The agreement’s title alone is not enough to reach a legal conclusion. A lawyer should check who actually sells to the customer and who bears the risks. The European Code of Ethics for Franchising can provide a useful standard of conduct, but it is not Croatian law.

3. Calculate the impact of promotions before accepting an offer

Pricing freedom has a direct financial impact. A brand may generate higher turnover during a promotion, while the discount leaves an individual outlet with too little to cover its costs.

For several typical products or services, calculate the figures for both regular and promotional sales. Start with revenue excluding VAT, where applicable, then deduct the purchase cost, consumables, payment processing fees, delivery and other variable costs. Include any sales-related franchise fees. The remaining amount must contribute towards wages, rent and other fixed costs.

In particular, check:

• who funds vouchers, loyalty points and cashback;
• whether different discounts can be combined;
• whether the same promotion applies both in the outlet and through delivery platforms;
• who reimburses the promised discount and when payment is made.

Do not accept the claim that more transactions automatically mean better results. Compare the contribution towards fixed costs before and during the promotion, and assess whether the outlet can handle extra orders without additional labour costs. Ask existing franchisees about their experience of running promotions, without asking about their future pricing plans or agreeing prices together.

4. Agree a clear process and verify how it works in practice

The agreement and operations manual should consistently describe your pricing independence within the limits of the permitted legal model. Avoid a situation where the agreement refers to recommendations but the manual requires you to apply every price list issued by head office.

For network-wide promotions, ask for a clearly defined process covering the notice period, duration, products included, participation arrangements and allocation of discount costs. If the franchisor promises reimbursement, agree how sales will be evidenced, the timetable for settlement and the procedure for raising disputes. These obligations should be clarified before the promotion is advertised.

Also check how price changes are reflected in menus, the online shop and the till system, and who corrects errors. Turn verbal assurances into written provisions before signing, and have a lawyer check that they comply with competition rules.

Practical takeaway: before buying a franchise, request a sample price list, a demonstration of how to change a price and a financial breakdown of one promotion. If you cannot clearly establish who decides the price and who pays for the discount, you do not yet have enough information to make a decision.