Buying a franchise: who sets selling prices?

A consistent brand image does not mean that every outlet must sell at the same price. Before joining a franchise network in Greece, examine who decides prices, how promotions work and who bears the cost of discounts. These details directly affect your profit margin and need checking both in the agreement and in day-to-day operations.

1. Distinguish recommended prices from mandatory ones

The franchisor may recommend a price list to help outlets position themselves in the market. Imposing fixed or minimum resale prices on independent franchisees is a different matter. The crucial question is not just how a price is described in the documents, but whether you can genuinely depart from it.

A ‘recommended’ price may become binding in practice if departures from it lead to threats to stop supplies, financial penalties or the loss of benefits. Similarly, limiting the maximum discount may amount to indirectly imposing a minimum price.

Ask for written answers to specific questions:

• Can I reduce the price of a product without prior approval?
• Is there a maximum price, and how is it applied?
• Are discounts on supplies or other benefits linked to compliance with the price list?
• What happens if I do not take part in a promotion?

Brand consistency alone is not sufficient to justify pricing restrictions.

2. Understand the rules that apply in Greece

Greece has no specific law comprehensively governing franchise agreements, nor a dedicated statutory system of mandatory pre-contractual disclosure for franchising. The general provisions of the Greek Civil Code apply, including those on pre-contractual good faith and liability, particularly Articles 197 and 198, alongside commercial and competition law.

For pricing restrictions, Greek Law 3959/2011 is particularly relevant, as is Article 101 of the Treaty on the Functioning of the European Union where trade between Member States is affected. Regulation (EU) 2022/720 provides a block exemption for certain vertical agreements, subject to conditions.

Setting fixed or minimum resale prices is a hardcore restriction and prevents the agreement from benefiting from that exemption. Recommended or maximum prices may be covered, provided they do not become fixed or minimum prices through pressure or incentives and the other conditions are met. The absence of an exemption does not replace the need for a case-by-case legal assessment.

The European Code of Ethics for Franchising calls for full and accurate written pre-contractual disclosure within a reasonable period. It is a self-regulatory framework, not Greek law. Ask an independent solicitor to assess the actual pricing mechanisms, not just the wording of the agreement.

3. Check the till system, apps and promotions

Genuine pricing freedom often becomes apparent in the software. Ask for a demonstration of the point-of-sale system and online order management. Check whether the local manager can change prices, whether central approval is required and whether an automatic update overrides local changes.

For online sales, establish who is selling to the customer. An order placed through a central app does not automatically entitle the franchisor to set the price of a sale made by the franchisee. The contractual structure and the way the operation works in practice require specific scrutiny.

For each promotion, ask for clarity on:

• Its duration and the products included.
• Whether participation is optional and how participation is confirmed.
• Who funds the discount or free product.
• How vouchers and loyalty reward redemptions are settled.
• The basis for calculating ongoing royalties during the promotion.

Speak separately to existing franchisees. Ask what happened when someone changed a price, rather than simply whether the price list is described as recommended. Record any differences between verbal descriptions and the contractual documents.

4. Turn your checks into a financial decision

Ask your accountant to calculate the contribution per sale: net revenue excluding VAT, less the cost of the product, packaging, payment or platform fees and other variable charges. Where ongoing royalties are charged on sales, include these too, using the basis set out in the agreement.

Compare a standard sale with one made under a centrally organised promotion. If the contribution falls, calculate how many additional sales are needed to maintain the same total contribution. Do not assume that increased footfall will make up the difference, or that the outlet can handle the extra volume without additional costs.

Before signing, ask for the agreement, operating manual and technical settings to be consistent with one another. A general statement of ‘independence’ does not remedy a practical mechanism that contradicts it. Also ensure there is a clear procedure for queries and disputes over promotional charges.

Practical takeaway: Choose a franchise arrangement in which you know who decides the price, who pays for the discount and what remains from each sale. Verify the details through documents, a demonstration of the systems in use, and independent legal and financial checks.