Franchise pricing: who can set your selling prices?

When buying a franchise in Hungary, knowing the initial fee and expected turnover is not enough. You also need to establish how much freedom you will have to set your selling prices. A consistent brand image across the franchise network does not, in itself, make every centrally imposed pricing rule lawful. Pricing rules directly affect whether your business will be viable given your local costs.

1. Distinguish recommendations from mandatory prices

A price list in a brand’s introductory materials can mean several things. It might be an illustration for planning purposes, a genuinely optional recommendation, a price ceiling or a retail price treated as mandatory. Before buying, ask for a clear explanation of which applies.

What matters is how it works in practice, not what it is called. A ‘recommended’ price is not a genuine recommendation if departing from it means losing a discount, receiving a warning or having head office reset the price in the system. Monitoring prices is not necessarily unlawful in itself, but pressure linked to departures from recommended prices raises significant competition law concerns.

Ask the franchisor:

• Can I set my local selling prices independently?
• Can I offer my own discounts without prior approval?
• What happens if I depart from the recommended price?
• Is there a required minimum margin or a limit on discounts?
• Do the same rules apply to in-store and online sales?

Setting a minimum margin or a maximum permitted discount can also amount to indirect price fixing. So do not just read the contract’s ‘pricing’ clause: examine the discount arrangements and penalties too.

2. Understand the Hungarian and EU legal framework

Hungary has no standalone, comprehensive franchise act, but the relationship is not unregulated. Sections 6:376–6:381 of Act V of 2013, the Hungarian Civil Code, govern franchise agreements. General contract rules also apply, including duties to cooperate and provide information. There is no statutory disclosure document with standardised content required for every franchise offering, nor a general register of franchise offerings.

Of particular importance to pricing is Act LVII of 1996 on the Prohibition of Unfair Market Practices and Restriction of Competition. If an agreement may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union may also apply.

The EU’s vertical block exemption rules are set out in Commission Regulation (EU) 2022/720. Under this framework, restricting a buyer’s ability to determine its own selling price is a hardcore restriction. Imposing fixed or minimum resale prices prevents the agreement from benefiting from the block exemption under the Regulation; any potential individual exemption requires a separate assessment.

Recommended or maximum selling prices do not, in themselves, constitute such a restriction, provided that pressure or incentives do not turn them into fixed or minimum prices. However, the agreement as a whole and the other conditions for exemption must still be checked.

Do not accept ‘uniform pricing is compulsory in franchising’ as a blanket explanation. Ask a lawyer with competition law expertise to assess the sales model, the parties’ actual roles and the specific provisions.

3. Check how centrally run promotions work in practice

In day-to-day operations, your pricing freedom is often shaped less by the main contract than by the campaign calendar and IT system. Ask for a demonstration of how you can change a price, who approves the change and what the system does when a centrally run promotion starts.

Work through a specific example: head office advertises a discounted bundle, but your outlet has higher staffing and service costs. Establish whether participation is mandatory, what price you can charge, who funds the discount and how any head office contribution is accounted for.

Vouchers, loyalty discounts and central ordering platforms deserve particular attention. Clarify who makes the offer to the customer, who the seller is and who bears the cost of the discount. A centrally advertised discount can cause losses at outlet level even if, on paper, you are free to set your own prices.

Do not assume that a short promotion is automatically exempt from competition law. Certain coordinated campaigns may require a case-by-case assessment; do not judge the lawfulness of mandatory participation solely by the campaign’s duration.

4. Ask for verifiable rules before signing

Prepare a short pricing schedule or request equivalent clarification in the contract. It should address recommended prices, any maximum prices, how your own discounts are handled and how centrally run campaigns are accounted for. The document should not merely promise independence: it should explain the practical arrangements that make it possible.

Request the relevant sections of the operating manual and a description of your access permissions in the IT system. If the contract allows independent pricing but the till software does not allow changes, that inconsistency needs to be resolved before you buy. Record how you can report a problem and who is responsible for resolving it.

Finally, recalculate your business plan using the prices you will actually be able to charge. Assess ordinary trading and promotional periods separately, including all associated costs. If the model only works with price increases that you have no realistic ability to make, that is an important warning sign when deciding whether to buy.

Practical takeaway: before you sign, the contract, promotional policy and sales system must all tell the same story: who decides the price, and who bears the cost of the discount.