Franchise pricing: what a Czech franchisor can control

In company-owned outlets, you set the selling prices. But once you expand an established business through independent franchisees, the same approach to management may fall foul of competition law. A franchise network shares a brand and know-how, but its members remain independent businesses. Before signing your first agreement, distinguish between protecting a consistent business concept and deciding what customers pay.

1. Understand the legal limits of a uniform price list

The Czech Republic has no specific franchise 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. There is no specific requirement to register franchise agreements or provide a statutory franchise disclosure document. General pre-contractual duties nevertheless apply: the absence of specific legislation does not mean unlimited freedom of contract.

The key legislation governing pricing rules is Act No. 143/2001 Coll., on the Protection of Competition. Where the arrangement may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union also applies. Commission Regulation (EU) 2022/720 and the related guidelines are also relevant when assessing vertical agreements.

Fixed or minimum resale prices pose a serious competition law risk. Arguing that customers expect the same brand experience everywhere is not enough. Franchise arrangements have no general exemption from competition rules, and a partner’s signature does not, in itself, make an unlawful restriction lawful. Have your proposed arrangement assessed by a lawyer with competition law expertise.

2. Distinguish recommendations from actual pressure

A recommended price can help franchisees put together their offering. However, it must remain genuinely non-binding. What matters is how the relationship works in practice, not simply the label on a price list or a sentence in the agreement.

Practices that may be problematic include:

• the franchisor threatening to reduce support for a partner who lowers prices;
• making a marketing contribution conditional on adherence to the recommended price;
• prohibiting discounts beyond a certain level in the agreement;
• an inspector requiring a departure from the price list to be corrected;
• a till system technically preventing the entry of a lower price.

Indirect price-setting can have the same effect as an explicit prohibition. Prescribing a margin is also risky if it effectively allows the franchisor to determine the selling price.

Maximum selling prices may be permissible provided the relevant competition law conditions are met. However, incentives or pressure must not turn them into fixed or minimum prices. Neither recommended nor maximum prices should therefore be presented as automatically safe regardless of the circumstances.

Use clear wording in internal communications: partners set their selling prices independently, and a departure from a recommendation does not, in itself, breach brand standards. The commercial team’s conduct must reflect the same principle.

3. Plan discount campaigns before producing advertising

National advertising often creates pressure for uniform pricing. A typical mistake is to order advertising materials first and only then consider whether independent outlets must take part.

For each campaign, establish in advance who sells to the customer, who funds the discount, which outlets are participating and how participation can be confirmed. Simply describing a campaign as voluntary is not a blanket legal safeguard: even an agreed fixed price requires a competition law assessment.

In certain circumstances, short-term coordinated low-price campaigns may require an individual assessment of their benefits and whether the restriction is necessary. Do not assume a general exemption applies simply because a promotion is brief or supports the whole network.

Advertising must also reflect the actual offer. Clearly explain any limitations on participating outlets and the availability of the offer. When announcing price reductions on goods, also take account of Act No. 634/1992 Coll., on Consumer Protection, including the rules on information about the previous price where they apply to the offer concerned.

4. Check till systems, apps and pricing data

A legally sound agreement will not help if the central software enforces a different approach. Before bringing your first partner on board, test the entire process, from changing a price in the till system to displaying it in the ordering app.

In particular, check whether franchisees can change a recommended price, who approves changes and whether their settings will be overwritten by the next update. Also clarify who the seller is for online orders and who decides the price. A central payment interface does not, in itself, settle that question.

Data sharing deserves separate attention. The franchisor may need data to support and evaluate the business concept, but should not act as an intermediary for coordinating independent partners’ future prices. Restrict access to detailed pricing plans on a genuine need-to-know basis. For network-wide benchmarking, consider suitably aggregated historical data; whether this is safe always depends on the specific format and market.

5. Carry out a cross-business review before launch

Bring together the draft agreement, price list, promotion rules, till settings and sample messages from regional managers. Have them reviewed together. The problem often lies not in a single clause, but in the gap between a contractual promise of independence and the franchisor’s day-to-day instructions.

Appoint someone to approve new pricing mechanisms and train support staff. A complaint from one partner about a cheaper neighbouring outlet must not automatically trigger intervention in that outlet’s pricing.

Practical takeaway: Before offering your first franchise, check that partners’ pricing independence exists not just on paper, but also in advertising, communications and the systems they use.