Buying a franchise: who can set selling prices?

The same brand, the same look across outlets — but must prices be the same too? Before joining a franchise network, check how much freedom you will have to set them. This is more than a legal detail: a centrally organised promotion may attract customers, but it could also leave you making a loss once your rent, wages and other costs are taken into account. So examine the pricing rules in the contract, the operating manual and the point-of-sale system itself.

1. Distinguish between a shared concept and price-setting

The Czech Republic has no specific franchise law and no statutory requirement to provide prospective franchisees with a standardised pre-contractual franchise disclosure document. However, the general pre-contractual obligations under the Civil Code, Act No. 89/2012 Coll., do apply. A franchise agreement is usually an agreement not specifically defined by law, concluded under Section 1746(2) of the Code, combining, for example, licensing and sale provisions.

Act No. 143/2001 Coll., on the Protection of Competition, is also central to pricing rules. Where the arrangement may affect trade between member states, Article 101 of the Treaty on the Functioning of the European Union also applies. Commission Regulation (EU) 2022/720 on the block exemption is important when assessing vertical agreements too.

A franchisee is generally an independent business, not a branch owned by head office. Protecting know-how and a consistent concept therefore does not give the franchisor an unrestricted right to dictate resale prices.

Recommended or maximum selling prices may be permissible if they comply with competition rules. However, pressure or incentives must not turn them into fixed or minimum prices. Imposing binding prices of this kind poses a serious competition-law risk; any potential exemption requires an individual assessment by a specialist.

2. Check how the rules work in practice, not just what they are called

The statement “prices are recommended only” is not enough on its own. What happens if you depart from the recommendation matters too. Ask for the pricing rules, a sample promotional brief and a demonstration of the point-of-sale system. Sensitive materials can be made available under a confidentiality agreement.

Ask specific questions:

• Can you change a price in the point-of-sale system yourself, or do you need head office approval?
• Is there a contractual penalty, a restriction on supplies or another sanction for deviating from the recommended price?
• Does a bonus or marketing contribution depend on following the recommended price?
• Is there a maximum permitted discount that effectively creates a minimum price?
• Who decides the price in the app, in the online shop and for in-person sales?

Ask for a practical demonstration showing how an operator sets their own price for a particular item and how the system responds. Technical settings may reveal a restriction that is not immediately apparent in the contract.

With the consent of the operators you approach, also ask about their experience of departing from recommended prices. You do not need to know their future pricing plans; what matters is how head office responds. Do not share future prices among independent franchisees or coordinate discounts. Cooperation within a franchise network is also subject to competition-law limits.

3. Calculate the impact of network-wide promotions on your outlet

A nationwide campaign will not necessarily produce the same financial result at every location. Choose a promotional item and prepare your own calculation: revenue excluding VAT, purchase cost, packaging, payment or delivery costs, and any ongoing fee based on sales revenue. What remains must contribute towards wages, rent and other fixed expenses.

Then ask who funds the discount. Are you entitled to a contribution from head office, or does it depend on further approval? When will it arrive, and how do you provide evidence of completed sales? The customer’s discount takes effect immediately, while the contribution may arrive later, putting pressure on your cash flow.

Assess loyalty points, vouchers and orders placed through the central app separately. Check who the seller is in relation to the customer, who receives the payment and how much the outlet receives. Knowing the price displayed on the screen is not enough.

Network-wide advertising must make clear which outlets are covered by the offer. Customer communications are also subject to Act No. 634/1992 Coll., on Consumer Protection. Announcements of reductions in product prices must take account of the rules on displaying the previous price, where those rules apply to the offer concerned.

4. Put the agreed rules into the contract

Have a lawyer review the contract alongside the manual and the rules for digital sales channels. The documents must not contradict one another: contractual freedom to set prices is of little use if the manual also imposes penalties for offering your own discounts.

In particular, negotiate a clear distinction between recommendations and obligations, rules for participation in campaigns, how promotions will be announced and how contributions will be calculated and paid. For recommended prices, insist that their non-binding status is reflected in actual practice. A problematic clause cannot be put right simply by relabelling it a “brand standard”.

If head office claims that a particular promotion with binding prices qualifies for an exemption, ask for its legal justification and an independent assessment. Do not rely on the argument that everyone does it this way. Competition rules in the Czech Republic are enforced by the Office for the Protection of Competition.

Practical takeaway: Before signing, ask to see a price change demonstrated, calculate the financial impact of one network-wide promotion and compare the results with the contract. Only when all three align will you know how much pricing independence you are actually buying.