Franchising in Denmark: Create a Lawful Pricing Policy

When turning your existing business into a franchise network, you cannot simply carry over head office’s control of selling prices. Franchisees are independent businesses, not branch managers. You should therefore establish a pricing policy before rolling out till systems, campaign plans and discount rules to your first franchisee. It must enable joint marketing without imposing unlawful resale price maintenance.

1. Distinguish between company-owned branches and independent businesses

In your own shops, you can normally set selling prices centrally. In a franchise network, however, you must take account of competition rules governing agreements between independent businesses. This applies even if everyone uses the same name, product range and shop layout.

Denmark has no specific franchise legislation, no specific mandatory franchise registration and no legally required standardised franchise disclosure document. Franchise agreements are subject to, among other legislation, the Danish Contracts Act, including section 36 on unfair contract terms. The absence of specific disclosure rules does not relieve the parties of liability for misleading information.

The Danish Competition Act is central to pricing policy, as are EU competition rules where trade between EU countries may be affected. The EU Vertical Block Exemption Regulation, Regulation (EU) 2022/720, sets out the conditions under which certain agreements between businesses operating at different levels of the supply chain may be exempt from the prohibition on anti-competitive agreements.

The block exemption is not a blanket approval of franchise agreements. Market shares and the specific restrictions in the agreement matter. Binding fixed and minimum resale prices are generally prohibited and constitute hardcore restrictions under the block exemption rules. Have an adviser with competition law expertise review the pricing provisions, not just the agreement’s general terms.

2. Define exactly what head office may decide

The starting point should be simple: franchisees set their own selling prices. Franchisors may generally recommend prices or set maximum prices, but pressure or incentives must not turn these into fixed or minimum prices in practice.

Simply labelling a price as ‘recommended’ is therefore not enough. Day-to-day conduct must support that freedom. If a franchisee risks less favourable supply terms, loss of support or threats of termination for departing from a recommended price, the recommendation may effectively be binding.

Draw up a short decision-making guide for head office:

• Recommended prices: Who calculates them, and how is their non-binding status communicated?
• Maximum prices: When are they used, and how is the freedom to sell at a lower price protected?
• Local discounts: How can franchisees create their own offers without central price approval?
• Departures from suggested prices: Who checks that exercising pricing freedom does not trigger penalties or loss of benefits?

Also avoid using joint meetings to encourage franchisees to agree future prices or discounts among themselves. The network can share experience, but it must not become a forum for price coordination between independent businesses.

3. Review the till system and campaign plan

A legally compliant agreement is of little help if the technology locks all prices. Map the entire pricing process, from the central product database to the till, ordering page, price label and receipt.

In particular, check whether franchisees can actually change a recommended price, how quickly that change takes effect and whether central updates overwrite local choices. Requiring franchisees to contact head office for every price change can create a practical barrier, even if the agreement promises independence.

Use a specific campaign as a test case. If head office wants to advertise a product at a particular price, clarify:

1. Which independent businesses are taking part.
2. Whether the campaign uses a recommended price or a maximum price.
3. How participating franchisees can offer a lower price.
4. How the advertising will make its scope clear, so customers are not misled about prices or participating shops.

The Danish Marketing Practices Act applies to advertising aimed at Danish customers. When announcing price reductions on goods, you must also take account of the rules on displaying the previous price. A shared campaign template cannot simply rely on head office’s pricing history if the relevant seller’s actual prices have been different.

Narrow exceptions or particular competition law assessments may apply to coordinated campaigns. Do not treat these as blanket permission: any arrangement involving fixed promotional prices requires a case-specific legal assessment.

4. Make pricing policy a routine compliance check

Assign responsibilities before the first franchise agreement is signed. The person responsible for the agreement must ensure that the contract and actual practice are consistent. The person responsible for systems must check the pricing functions. The person responsible for marketing must ensure that adverts accurately reflect participation and comply with the lawful pricing framework.

Then carry out a practical check: ask a prospective franchisee to change a recommended price, create a local discount and sell below a maximum price. Check the results across all customer-facing channels. Document any faults and assign responsibility for correcting them.

Repeat these checks whenever you introduce new systems or campaign formats. Review internal messages too: wording such as ‘everyone must follow this price’ can undermine an otherwise compliant policy. Provide a straightforward way to report perceived pressure over pricing, and follow up without penalising the person who raises the issue.

Practical takeaway: Make sure your agreement, technology and campaigns all support the same freedom to set prices. A strong franchise network is built on a shared concept, not hidden central control over independent businesses’ selling prices.