Buying a Franchise in Egypt: Who Sets Prices and Pays for Discounts?

A price list may seem like an operational detail you can leave until after buying a franchise, but it determines your ability to cover costs from day one. Within a franchise network, the franchisor may seek to standardise the customer experience, while individual franchisees face different rents, wages and other costs. Before signing, settle two linked questions: who decides the price, and who pays for the discount?

1. Distinguish between recommended and mandatory prices

Do not settle for wording such as ‘the outlet must comply with the approved pricing policy’. Ask to see the policy itself, establish whether its prices are recommended or mandatory, and check whether they vary by location or sales channel. A uniform price list in the commercial proposal does not, on its own, explain how much control you will have once you open.

Also review any documents that could give the franchisor authority to change prices, such as the operations manual, campaign schedules and terms governing use of the sales system. The contract may appear flexible, while another document allows prices to be changed centrally without your consent.

Ask for written answers to the following questions:

• Can you adjust a product’s price if its local cost rises?
• Do promotions you propose require prior approval, and how quickly will you receive a response?
• Are in-store prices different from delivery prices?
• Who has permission to enter and change prices in the point-of-sale system?
• Is there a notice period before a new price list takes effect?

The aim is not to secure unlimited freedom, but to understand which decisions you actually control and which you will have to bear the consequences of without making them yourself.

2. Check the limits on pricing under Egyptian law

Egypt has no comprehensive standalone franchise law, no general mandatory disclosure regime specifically for franchises, and no dedicated regulator overseeing the franchisor–franchisee relationship. That does not mean every contractual term is permissible simply because both parties have signed it.

The relationship is subject to general legal rules, including Civil Code No. 131 of 1948 and Commercial Law No. 17 of 1999. The Commercial Law’s technology transfer provisions may apply depending on the substance of the agreement and the nature of the know-how transferred, rather than merely because the arrangement is called a ‘franchise’.

For pricing in particular, review the Protection of Competition and Prohibition of Monopolistic Practices Law No. 3 of 2005, as amended. Arrangements that impose resale prices or restrict pricing freedom may raise competition concerns; the assessment depends on the nature of the relationship, the practice and the market concerned. Do not assume that brand consistency automatically justifies every restriction, or that every price recommendation is unlawful.

Ask a specialist Egyptian lawyer to assess both the wording and how it will be applied. A price described as ‘recommended’ may not genuinely be so if departures from it trigger penalties or contractual pressure. This is a separate exercise from simply checking that the pricing clause is clearly worded.

3. Establish who funds each type of discount

A clause stating that ‘participation in campaigns is compulsory’ does not answer the funding question. A promotion might involve a direct discount, a free product, a voucher for later use or the redemption of loyalty points. Each has different costs and timings, even if the customer sees it as a single offer.

Create a table for each type of promotion covering who makes the decision, who bears the cost, how each party’s contribution is calculated, and the settlement documents and deadlines. If the franchisor promises to reimburse the outlet, specify whether reimbursement will be in cash, by credit note or in goods, and how discrepancies or rejected claims will be handled.

Pay particular attention to vouchers sold or issued by another party and then redeemed at your outlet. Ask who originally received the payment, how your share reaches you, and what happens if settlement is delayed. Likewise, agreeing who funds the advertising does not settle who funds the discount itself: the franchisor may pay for the advertising while the outlet bears the full price reduction.

Ask for a previous settlement statement with confidential details removed, or a written worked example reflecting the proposed terms. The aim is to understand the flow of money, rather than rely on a promise that the campaign ‘will increase sales’.

4. Test order profitability during a promotion

Before accepting compulsory participation, calculate how much remains from each order after the discount and associated variable costs. Use verifiable figures for product costs, packaging, sales-channel commissions and any other expenses that vary with each order, and ask an accountant to ensure taxes are treated correctly.

Test three scenarios: sales at the normal price, sales during an outlet-funded campaign, and sales during a jointly funded campaign. Then ask: will the expected increase in orders compensate for the lower amount retained per order? Does the outlet have the operational capacity to handle that increase without waste or delays?

Do not treat promised reimbursement as immediately available cash. If you pay for materials today and recover the franchisor’s contribution later, you will need working capital even if the promotion looks profitable on paper. Assess the campaign’s profitability separately from your ability to fund it.

5. Turn the agreement into a clear contractual process

Negotiate advance notice of campaigns, a written statement of their costs and duration, and a process for raising a reasoned objection where the outlet’s circumstances make participation unsustainable. You could also discuss a limited trial before a wider rollout, with clear criteria for evaluating the results. Do not assume, however, that these arrangements are automatic legal entitlements.

Specify how approval will be documented, who will authorise settlements, and how pricing errors in the system will be corrected. If the franchisor can amend the policy, ask for clear limits on that power rather than an open-ended reference to future instructions.

Practical takeaway: Before buying a franchise, obtain the pricing policy, a sample discount settlement statement and a profitability calculation for one campaign. Do not sign until you know who sets the price, who bears the discount, and when you will receive any contribution owed to you.