Buying a franchise: who can set customer prices?

A shared price list may look like a useful tool when choosing a franchise. But if you cannot adjust prices to reflect local costs, it becomes a significant constraint on your business. A franchise network brings together independent businesses: franchisees generally sell in their own name, for their own account and at their own risk. Before signing, check not just the recommended prices, but above all who actually decides the final price.

What Czech and EU law allows

The Czech Republic has no specific franchising legislation. Franchise agreements are usually concluded as contracts not specifically defined by statute under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. However, freedom of contract does not mean that every pricing restriction can be validly agreed.

Pricing arrangements are subject to Act No. 143/2001 Coll., on the Protection of Competition, and, where trade between EU Member States may be affected, Article 101 of the Treaty on the Functioning of the European Union. Commission Regulation (EU) 2022/720 on the block exemption for vertical agreements is also important.

Imposing fixed or minimum resale prices on an independent franchisee is generally prohibited. This is known as a hardcore restriction, which removes the benefit of the block exemption. Any individual exemption requires a specific legal and economic assessment; maintaining a consistent brand image is not enough on its own.

Recommended and maximum prices may be permissible, provided that pressure or incentives do not turn them into fixed or minimum prices. To benefit from the block exemption, neither the supplier’s nor the buyer’s share of the relevant market may exceed 30%, and the other conditions must also be met. Exceeding this threshold does not in itself make an arrangement unlawful: it means that an individual assessment is needed.

Check your actual freedom, not the price list’s heading

Calling a document a ‘recommended price list’ does not prove that following it is voluntary. What matters is how the relationship works as a whole. Review the agreement, operating manual, promotion rules and sales system settings together.

In particular, ask:

• Can I lower a price without prior approval from head office?
• Can I increase a recommended price, provided it is not a permissible maximum price?
• Can I independently decide to give a customer an individual discount?
• Will charging a different price affect supplier bonuses, access to support or the outlet’s performance rating?
• What happens if I do not adopt the central price list?

Warning signs include bonuses conditional on following recommended prices, threats to restrict supplies because you sell at lower prices, or a cap on discounts from a fixed price list. A ban on advertising prices below a specified level may also restrict pricing freedom, even if selling for less is theoretically allowed.

Monitoring prices is not necessarily unlawful in itself. Problems arise particularly when monitoring is followed by demands to change prices, penalties or other forms of pressure. Ask for a specific example of how head office handled an outlet charging a different price. Compare the answer with current franchisees’ experiences.

Test the till system and joint promotions

A legally sound agreement is of little help if the till system will not accept a different price. Before signing, ask for a demonstration of how to change a price, create a local discount and decline an automatic update to the recommended price list. Find out who has the necessary permissions and whether mandatory head office approval prevents you from making changes independently.

Pay particular attention to online orders. Who enters into the contract with the customer, who is the seller and who sets the price? If you sell the goods but head office sets the price without allowing you to change it, the model warrants a competition law review. The position may differ if head office is genuinely the seller, but the labels used in the paperwork are not decisive on their own.

For joint advertising campaigns, distinguish between promoting the offer and committing to sell at a particular price. Ask for the participation rules, whether you can opt out and how customers are told which outlets are taking part. A short promotional period does not automatically make a mandatory uniform price permissible.

Also calculate the effect on your margin. Deduct purchase costs, variable expenses and associated fees from the promotional selling price. A permissible maximum price may be commercially unattractive for a particular outlet, even though it does not constitute prohibited minimum resale price maintenance.

What to clarify before signing

Insist that the agreement reflects how the business actually operates. For recommended prices, it should be clear that departing from them will not, in itself, lead to a penalty or loss of a benefit. The technical settings must enable this independence, not merely promise it.

Prepare a short list of changes to request during negotiations:

• a clear distinction between recommended, maximum and promotional prices;
• removal of indirect incentives to comply with fixed or minimum prices;
• effective system permissions to change your own selling prices;
• advance clarity on the rules for participating in joint promotions;
• an explanation of who is responsible for pricing in each sales channel.

If the franchisor insists on a binding uniform price list, have the entire arrangement reviewed before signing by a lawyer experienced in competition law. Do not accept the fact that every outlet follows the same rule as proof that it is lawful.

Practical takeaway: Check your pricing independence in the agreement, in the till system and in the network’s day-to-day practices. Only join a franchise once you understand how you can influence your own margin and what pricing restrictions you are actually accepting.