Buying a franchise: who sets prices in Portugal?

A national campaign can attract customers while also reducing your outlet’s margins. Before entering the Portuguese franchise market, find out who sets the final selling price and who pays for each discount. Brand consistency does not give the franchisor unlimited freedom to impose resale prices. Your assessment should cover the contract, promotional campaigns and how the sales systems work in practice.

1. Understand the rules that limit price-setting

Portugal has no specific franchise law. The applicable legal framework includes the Civil Code, with its principles of freedom of contract and good faith, and Decree-Law No. 446/85 on standard contract terms, where terms have been drafted in advance without individual negotiation.

For pricing, Law No. 19/2012 of 8 May, which sets out Portugal’s competition law framework, is particularly relevant. Where an agreement may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union also matters. Regulation (EU) 2022/720 provides a block exemption for certain vertical agreements, subject to conditions.

In practical terms, imposing fixed or minimum resale prices generally constitutes a serious restriction of competition. Under that regulation, it is a hardcore restriction that removes the benefit of the block exemption. Any possible justification in an individual case requires a specific legal assessment; it does not arise simply because the contract is part of a franchise network.

Recommended and maximum prices may be permissible, provided they do not become fixed or minimum prices through pressure or incentives. The European Code of Ethics for Franchising is a self-regulatory reference, not Portuguese law or an exception to competition rules.

2. Distinguish a recommendation from an actual obligation

Finding the words “recommended price” in the contract is not enough. You need to check whether you can charge a different price without facing consequences. A recommendation backed by threats, penalties or benefits conditional on compliance may amount to indirect price enforcement.

Ask for a demonstration of the invoicing software and sales system. Check whether the outlet manager can change prices, create discounts and amend campaigns. A technical restriction can limit autonomy just as much as a written clause.

Seek clear answers to these questions:

• Can you sell below the recommended price without prior authorisation?
• Are there limits on discounts or rules on minimum margins?
• Does the brand contact outlets that charge different prices? If so, why?
• Does access to bonuses, campaigns or commercial terms depend on following the price list?
• Who sets prices on the brand’s website, app and delivery platforms?

Collecting pricing information across the network is not, in itself, evidence of an infringement. The problem may lie in using that information to pressure franchisees into maintaining a particular price. Ask for examples of how things work, not just verbal assurances of autonomy.

3. Establish who funds campaigns and discounts

Assess each promotion as a specific commercial transaction. Request the terms of previous campaigns and identify who funds the discount, who receives payment and how accounts are settled between the brand and the outlet.

Calculate the contribution margin on a promotional sale: start with revenue excluding VAT and deduct the associated variable costs, including the product, packaging, commissions and applicable contractual charges. Do not confuse higher sales with improved profitability.

Pay particular attention to situations such as:

• Vouchers and loyalty points: who reimburses the outlet, and within what timeframe?
• Bundle offers: how is the discount allocated between products?
• Home delivery: do the discount, platform commission and packaging costs all apply to the same sale?
• National campaigns: is participation optional, and how are participating outlets identified?

Coordinated campaigns may raise competition issues depending on their design and context. Do not assume that a short duration automatically makes an imposed price lawful. Seek legal advice where participation is mandatory and the price is set by the brand.

4. Document the rules before committing

Gather the contract, commercial schedules, promotional rules and details of the relevant sales system features. If there are inconsistencies, request written clarification and amendments before signing.

Make sure the documentation explains the status of the prices communicated by the brand, the outlet’s actual pricing autonomy and the process for joining campaigns. It should also specify how costs are shared, reimbursement deadlines and how centrally applied discounts are handled.

Talk to franchisees about specific experiences: were they able to change a price? Did they decline to take part in a campaign? Did they receive the agreed reimbursements? Their answers can help you compare the contract with actual practice, but they are no substitute for an assessment by a lawyer experienced in competition law.

Practical takeaway: before buying, confirm three things: who sets the price, who funds the discount and whether the system allows you to exercise the autonomy promised. A vague answer to any of these warrants further investigation before you sign.