Franchise pricing: how to comply with competition law

In an established business, the owner usually sets prices across all company-owned outlets. When independent business owners join a franchise network, that freedom has different limits. A shared brand does not automatically give you the right to dictate franchisees’ selling prices. Before signing your first agreement, check not only its terms but also till settings, promotional rules and how head office communicates with franchisees.

1. Separate shared standards from pricing decisions

Franchisees run their own businesses and bear the associated risks. They are not managers of additional branches owned by the franchisor. You can set standards for customer service, premises and quality, but resale pricing is subject to separate restrictions. Rolling out the prices used in your own outlets across all franchised locations without a legal review is therefore risky.

Poland has no separate statute comprehensively regulating franchising, nor a dedicated compulsory franchise register. A franchise agreement remains an ‘unnamed contract’ — a contract type not specifically defined by statute — entered into under the principle of freedom of contract in Article 353¹ of the Polish Civil Code. That freedom does not, however, allow parties to bypass mandatory legal provisions.

The Polish Act on Competition and Consumer Protection is central to pricing policy, particularly its prohibition of agreements that restrict competition. Where the arrangement may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union is also relevant. The assessment of vertical agreements takes account of the relevant exemption rules, including EU Regulation 2022/720 where applicable.

Franchise industry codes of ethics do not replace these rules. Nor does a franchisee’s agreement to a particular clause establish that it is lawful. Any review should start with how the arrangement actually works, rather than simply what the document is called.

2. Establish what a recommended price really means

As a general rule, agreeing fixed or minimum resale prices is prohibited. This also covers indirect methods, such as limiting the maximum discount a franchisee can offer or setting their margin in a way that determines a minimum price.

Recommended and maximum prices may be permitted, but the terms of the arrangement need to be assessed. A recommendation must remain a genuine recommendation. If head office penalises lower prices or rewards adherence to a specified price level, labelling that price ‘suggested’ does not remove the risk of a breach. A maximum price must not become a fixed price in practice either.

For example, you may provide a franchisee with a profitability calculation and a proposed product price. However, the franchisee should be able to make their own decision within the lawful terms of the arrangement. Withdrawing a purchasing discount solely because they sell below the recommended price changes the nature of that arrangement.

Before launching, check four things:

• whether the agreement imposes penalties for departing from recommendations;
• whether bonuses and marketing support depend on maintaining specified prices;
• whether the franchisee can actually change prices in the point-of-sale system;
• whether head office staff exert informal pressure over the phone or during visits.

Do not assume that a small franchise network is automatically exempt from the prohibition. Resale price maintenance is a particularly serious restriction of competition.

3. Design promotions and systems before opening

The greatest problems often emerge during a joint campaign rather than in the agreement itself. Promotional materials have already been ordered, the advertising shows a single price, and the franchisee cannot change it at the till. Every promotion should therefore undergo a legal and operational review before it is announced.

Set out who determines the offer, whether franchisees participate voluntarily, who funds the discount and how participating outlets are identified in communications. Voluntary participation alone does not determine whether a pricing agreement is lawful. Nor should you treat a short campaign period as an automatic exception to the prohibition.

Ensure that the till system gives franchisees the appropriate permissions to change prices. A price proposal uploaded centrally should not be technically locked if it is intended as a recommendation. Test price changes, local discounts and the end of a promotion using an account with franchisee permissions, rather than only an administrator account.

Remember your obligations towards consumers too. When announcing a price reduction, take account of the Polish Act on Information on the Prices of Goods and Services, including the rules on displaying the lowest price in the 30 days before the reduction and the statutory exceptions. Do not automatically copy the price history of a company-owned outlet into an offer from a franchisee who previously charged different prices.

4. Put communication checks and clear responsibilities in place

Appoint someone to review campaigns, pricing communications and system changes. Train franchisee support managers: rather than demanding that a franchisee ‘restore the correct price’, they should explain the commercial reasoning behind a recommendation without forcing its adoption.

Take care at franchise network meetings as well. Do not organise agreements on future prices between franchisees or exchanges of individual discount plans intended to coordinate their behaviour. A complaint from one business owner that another is selling too cheaply should not trigger pressure from head office to raise prices.

For the legal review, submit the agreement, promotional terms, sample messages, bonus rules and a description of how the tills work together as one package. This reveals more than a standalone clause on franchisee independence. Repeat the review whenever the software or the way campaigns are funded changes.

Practical takeaway: before taking on your first franchisee, trace the journey of a price from head office’s proposal to the customer’s receipt. Remove mechanisms that turn a recommendation into an obligation, and have the entire model reviewed by a lawyer specialising in competition law.