Franchising your business: setting a framework for selling prices

In your existing business, you set the prices at every outlet. When you open your concept up to franchisees, that approach needs to change: you are supporting a network of independent business owners, not running a group of branches. Before recruiting, decide how to encourage consistent pricing without turning recommendations into requirements. This preparation covers not only the contract, but also your software and commercial practices.

1. Distinguish between recommended and imposed prices

In France, franchising is not governed by a single legal framework. The relationship is subject to several areas of law, including contract, intellectual property and competition law. For resale prices, the key provisions are Article L. 420-1 of the French Commercial Code and, where trade between EU Member States may be affected, Article 101 of the Treaty on the Functioning of the European Union.

The EU Vertical Block Exemption Regulation, Regulation (EU) 2022/720, addresses, among other things, restrictions on a buyer’s freedom to determine its selling price. Imposing a fixed or minimum resale price is a hardcore restriction under competition law. Labelling a price as ‘recommended’ does not protect the franchisor if its conduct effectively makes that price compulsory.

Subject to the rules applicable to your circumstances, you may communicate recommended or maximum prices. However, pressure or incentives must not turn them into fixed or minimum prices.

Warning signs include:

• threatening to withdraw support because a franchisee sells at a lower price;
• making a benefit conditional on following the recommended price;
• setting a maximum discount that effectively imposes a minimum price;
• asking field support teams to bring outlets that depart from the price ‘back into line’.

Have your arrangements reviewed by a lawyer familiar with distribution agreements, rather than relying solely on a general independence clause.

2. Turn your internal prices into useful recommendations

Start by listing every place where your prices appear: till systems, catalogues, websites, apps, quotation templates, posters and sales scripts. For each, identify who enters the price, who can change it and how a change takes effect.

Next, prepare an explanatory sheet for each product or service category. Set out the intended market positioning, cost assumptions and commercial reasoning behind the recommended price. Distinguish between figures observed in your own business and assumptions that each franchisee will need to adapt to their operation.

The aim is to make the recommendation understandable, not to guarantee a margin. Differences in rent, staffing costs or local conditions may justify a different price.

Above all, test whether franchisees can genuinely change prices. Software that displays a recommended price but requires your authorisation to change it may contradict the contract. Give franchisees access to the relevant settings and establish a clear process for updating their customer-facing materials.

Make this distinction clear within your franchise network from the earliest discussions: a shared brand identity does not require identical prices everywhere.

3. Design promotions that respect franchisee independence

A national campaign raises a practical challenge: how do you advertise a shared offer when several independent business owners set their own prices? Resolve this before ordering advertising materials.

For each promotion, prepare a brief specifying:

• the products or services covered and the duration;
• how the promotion will work;
• the participation and funding arrangements;
• the participating outlets and the information given to customers;
• how orders placed through digital channels will be handled.

Depending on the structure, a maximum price may allow a franchisee to offer a lower price. However, you must check that the financial and technical conditions do not make that option unworkable in practice.

Do not assume that a short campaign automatically permits imposed prices. Some coordinated promotions may warrant a specific competition-law assessment, but justifying them requires a legal review of the actual arrangements. Their short duration alone is not enough.

For price reduction announcements, also check the requirements of the French Consumer Code, particularly those concerning the prior price where applicable. National advertising materials must not assume that every outlet has the same pricing history.

4. Align your contract, tools and network support

Your contract must reflect how the network actually operates: the franchisee’s pricing freedom, the nature of recommendations, campaign rules and responsibilities for marketing materials. Operating documents must not reintroduce an obligation that is absent from the contract.

Before a prospective franchisee commits, you must also comply with the pre-contractual requirements. Article L. 330-3 of the French Commercial Code, introduced by the Doubin Law, applies where its conditions are met, notably where a business makes a trade name, brand or other identifying sign available alongside an exclusivity or near-exclusivity commitment. The pre-contractual disclosure document, whose contents are specified in Article R. 330-1, and the draft contract must be supplied at least twenty days before signing or before any advance payment covered by these rules.

Finally, train your field support teams: they may explain a recommendation, but must not penalise a lawful departure from it. Regularly review messages sent to franchisees and the settings in your systems.

Key takeaway: before launching your first franchise, test a complete price change, from the till to the price display. If the franchisee cannot genuinely decide the price, revise your arrangements.