Franchise Pricing Rights in Hong Kong: Check Uniform Prices, Discounts and Promotion Responsibilities Before Signing

When you join a franchise network, the brand will often require consistency across menus, products and marketing. But a consistent brand image does not mean every selling price can be made compulsory. Before buying a franchise in Hong Kong, establish who sets prices, who bears the cost of discounts, and whether the systems allow you to put your pricing decisions into practice. These arrangements directly affect the profit on each transaction and may also raise competition law concerns.

1. Understand the Legal Boundaries of Pricing Arrangements in Hong Kong

Hong Kong currently has no legislation specifically governing franchising. Nor is there a statutory disclosure document, dedicated registration scheme or mandatory franchise code of conduct that applies to all franchise recruitment. The parties’ rights depend primarily on their contract and common law principles. However, franchise agreements must still comply with generally applicable laws: both parties signing an agreement does not override legal restrictions.

Pricing is particularly relevant to the Competition Ordinance (Cap. 619). Its First Conduct Rule prohibits agreements, concerted practices and decisions by associations of undertakings that have the object or effect of preventing, restricting or distorting competition in Hong Kong. Pricing arrangements between a brand and independent franchisees are not automatically exempt.

A supplier’s requirement to charge fixed or minimum resale prices may constitute resale price maintenance. Whether this breaches the rule depends on the arrangement’s object, effects, operation in practice and any applicable exclusions or exemptions; there is no blanket answer. Genuinely non-binding recommended retail prices are different from prices enforced through fines, withheld supplies or withdrawn benefits. A maximum price also needs to be assessed beyond its label: if it operates as a fixed price in practice, it still requires scrutiny.

Do not, therefore, rely on the outdated claim that Hong Kong has no competition law. If you encounter mandatory pricing clauses, ask a Hong Kong lawyer with competition law expertise to assess them rather than relying solely on the brand’s explanation.

2. Due Diligence Means Checking Systems, Not Just Contracts

Ask the brand for the franchise agreement, operations manual, recent promotion notices and instructions for managing prices in the point-of-sale system. The key is to check whether written commitments match day-to-day controls.

Work through these questions:

• Can franchisees genuinely adjust prices described as “recommended retail prices”?
• Do price changes require notification to head office, or prior approval? What are the approval criteria?
• Who sets prices in the point-of-sale system? Can franchisees change them?
• Could offering your own discounts, clearance deals or bundles lead to penalty points, withheld supplies or a finding that you have breached the agreement?
• Can dine-in, takeaway and different platform prices vary to reflect different costs?

For example, a contract may state that franchisees set their own prices, but if only head office can change prices in the system, that independence may mean little in practice. Ask the brand to demonstrate the process, and record the necessary access rights and response times in a schedule to the agreement.

With their consent, you can also ask existing franchisees whether the price-change process works in practice. However, due diligence should not become a channel for exchanging future prices or agreeing joint price increases.

3. Discuss Participation in Promotions Separately from Their Costs

Network-wide offers can quickly turn a pricing issue into a cash-flow problem. Customers who see an advertisement for the brand may expect every outlet to honour the offer, while franchisees may not yet know who will fund the discount.

Before signing, ask for clear terms covering whether participation is voluntary, the notice period, eligible outlets and sales channels, and whether the offer can be combined with platform discounts, vouchers or other discounts. If the brand provides a subsidy, specify how it is calculated, the documents needed to claim it, payment dates and the process for resolving disputes.

When assessing a promotion, use a transaction worksheet to check:

Amount paid by the customer + confirmed brand subsidy − cost of goods − platform and payment fees − relevant franchise charges = the transaction’s initial contribution.

This is not net profit: rent, staff costs and other fixed overheads have not yet been deducted. Run each offer through the calculation to see whether “increasing sales” also means increasing losses. Do not treat an unconfirmed subsidy as immediately available cash.

If you can opt out, specify how the brand will clearly identify participating outlets in its advertising and ordering interfaces, reducing misunderstandings when customers arrive. Consumer-facing statements about prices and offers must also take account of the Trade Descriptions Ordinance (Cap. 362), which regulates misleading commercial practices.

4. Put Workable Pricing Arrangements in Writing

Simply adding a clause saying that “both parties will comply with competition law” is not enough. A lawyer should review the contract, manual and system permissions against the actual operating model to ensure that they do not contradict one another.

Ask for the documents to address four points clearly: first, which prices are merely recommendations and what decision-making powers franchisees actually have; second, how participation in promotions is confirmed and when related subsidies are settled; third, what notification and consultation procedures head office must follow when updating manuals or systems; and fourth, who must correct pricing errors or resolve subsidy disputes, and who bears costs already incurred.

At the same time, avoid using franchisee groups to agree minimum prices, collectively withdraw discounts or exchange sensitive future pricing plans. Coordination between franchisees can create a separate competition law risk. A meeting chaired by the brand does not make the resulting arrangement lawful by default.

Practical takeaway: Before signing, ask the brand to demonstrate a price change, then calculate the transaction costs for a real promotion. If there are still no clear answers to “who can change prices, who funds discounts and when are subsidies paid?”, resolve those points and put them in writing first. Do not treat verbal promises as protection for your pricing rights.