Franchise pricing: recommended price lists and promotions

When you turn an existing business into a franchise network, your shop’s price list cannot automatically become an instruction to franchisees. In company-owned outlets, you set retail prices; in a franchise network, you work with independent business owners. Before offering a franchise agreement, you therefore need to establish how to communicate recommended prices, organise promotions and update sales materials without unlawfully imposing resale prices.

1. Distinguish brand standards from pricing

Italian Law No. 129 of 6 May 2004, which governs franchising in Italy, defines the relationship as one between legally and economically independent parties. It also requires the agreement to be in writing, otherwise it is void. Belonging to the same network does not, therefore, remove a franchisee’s independence.

Pricing policies are subject not only to franchising legislation but also to competition rules: Article 101 of the Treaty on the Functioning of the European Union, where applicable, and Italian Law No. 287/1990. EU Regulation 2022/720 governs the block exemption for certain vertical agreements and treats the imposition of fixed or minimum resale prices as a hardcore restriction.

In practice, you can define service features, product presentation and quality standards without acquiring a general right to set the franchisee’s final selling price. A recommended or maximum price may be compatible with these rules, provided it does not become a fixed or minimum price through pressure or incentives. The assessment also depends on the terms of the agreement and market conditions: reassuring contractual wording alone is not enough.

2. Prepare a genuinely recommended price list

Start with the prices used in your own outlets, but keep three pieces of information separate: the supply price charged to the franchisee, any recommended retail price and the financial assumptions used to calculate it. These are distinct figures and should be clearly identifiable in operational documents too.

For each item on the recommended price list, prepare an internal record covering:

• the product or service concerned and the features included;
• the recommended price and the date it was updated;
• the cost assumptions used, without presenting them as universally applicable;
• who is responsible for updates and how these will be communicated to franchisees.

Labelling a price “recommended” is not enough if you then penalise anyone who charges a different price. Avoid, for example, making supply discounts, routine support or access to business opportunities conditional on following the recommended price. Repeated demands and threats of contractual consequences can also turn a recommendation into a requirement.

Train the people who support franchisees as well: inappropriate sales communications can undermine a well-drafted agreement. Discussions about pricing should explain the reasoning behind the proposal, not demand that franchisees follow it.

3. Plan promotions before advertising them

Network-wide campaigns are the most sensitive area. A national leaflet advertising a single price can create customer expectations and put pressure on franchisees, particularly if it is published before you have checked how the promotion will work.

Before launch, prepare a promotional brief setting out the duration, products involved, participating outlets, expected availability and how any costs will be shared. If you plan to provide a contribution from head office, describe its conditions and have them legally reviewed: it must not become an indirect means of imposing an unlawful price.

For example, if you want to promote a seasonal service, first establish which franchisees wish to participate and check that the offer is financially viable. Have the proposed structure assessed to determine whether it legitimately uses a maximum price or requires a more specific analysis. Do not assume that a short campaign, or one described as optional, is automatically lawful.

In public-facing materials, make the terms and scope of the offer clear. Avoid presenting a price as available everywhere when some outlets are not participating. Consumer protection rules and requirements for accurate promotional communications also remain applicable.

4. Check systems and practices before recruiting franchisees

A sound policy must also work in practice. Check that tills, digital catalogues and quotation templates allow permitted price changes without forcing franchisees to seek approvals that undermine their pricing independence.

Run a simulation: a franchisee wants to sell below the recommended price. Who receives the notification? Which systems need updating? How does the support team respond? If the process stalls or triggers a penalty, the procedure needs reviewing.

Also avoid using network meetings as a forum for franchisees to agree future prices or common minimum prices. Sharing business experience must not turn into price coordination.

Practical tip: before signing your first franchise agreement, have the price list, promotional brief, sales communications and till configuration reviewed together. Pricing freedom must be reflected in day-to-day conduct, not just contractual clauses.