Franchising in Portugal: setting prices without imposing them

When turning an existing business into a franchise network, the founder can no longer set prices for every outlet as though they were all company-owned. Franchisees are independent business owners, and brand consistency does not automatically entitle the franchisor to impose resale prices. Before recruiting partners, establish a commercial policy that distinguishes between recommendations, legally permissible limits and decisions that belong to each operator.

1. Separate the business concept from pricing decisions

In a company-owned outlet, the business can directly set the prices it charges. In a franchised outlet, protecting the brand’s identity does not remove the franchisee’s commercial independence. A service standard or mandatory recipe is not treated in the same way as a mandatory minimum price.

Start by identifying where prices appear in the business: price lists, labels, menus, sales proposals, apps, advertising and invoicing software. A recommendation in the contract can become an obligation in practice if the system prevents any changes.

Prepare an internal matrix with three categories:

• Prices at company-owned outlets: set by the company operating them.
• Recommended prices for franchisees: reference prices that franchisees can genuinely change, including by setting lower prices.
• Maximum prices or promotional terms: subject to legal review, taking account of how the initiative works in practice.

Sales, support and technology teams must understand this distinction. It is not enough for the lawyer to know the rule if the people supporting outlets insist on compliance with the price list every day.

2. Understand the rules that apply in Portugal

Portugal has no specific law comprehensively governing franchise agreements, nor a general mandatory pre-contractual disclosure regime specifically for franchising. Applicable rules include the general provisions of the Portuguese Civil Code, including good faith in the negotiation and performance of contracts, and, where relevant, the rules on standard contract terms under Decree-Law No. 446/85.

For pricing, the key provisions are Competition Law No. 19/2012, as amended, and Article 101 of the Treaty on the Functioning of the European Union where an agreement may affect trade between Member States.

Regulation (EU) 2022/720 provides a block exemption for certain vertical agreements, subject to conditions. Restricting a buyer’s ability to determine its selling price constitutes a hardcore restriction under that regime. Imposing fixed or minimum resale prices should therefore not form part of the network’s standard policy.

Subject to the applicable conditions, the regulation permits recommended or maximum prices, provided they do not become fixed or minimum prices through pressure or incentives. Losing the benefit of the block exemption requires an individual assessment; it does not mean that any practice can be legitimised by a contractual clause.

The European Code of Ethics for Franchising is a self-regulatory reference, not a law or permission to restrict competition. Legal review should cover both the agreement and commercial practice.

3. Make recommendations a useful tool

A recommended price list should explain the economic reasoning behind it without promising identical margins at every location. Rent, labour costs, wastage and demand can vary between outlets.

Provide a costing worksheet that allows franchisees to enter their own costs and assess the resulting margin. Identify the assumptions used, the date of the analysis and how VAT is treated. The aim is to support informed decisions, not to produce a justification for imposing a price.

Avoid mechanisms that undermine the freedom to depart from recommendations, such as:

• Threatening to suspend supplies because a franchisee charges lower prices.
• Making commercial benefits conditional on compliance with a minimum price.
• Requiring prior approval for any discount.
• Requiring compliance with a minimum advertised price, even if a different price is accepted at the point of sale.

Do not use network meetings as a forum for franchisees to agree future prices among themselves. Franchisor support must not become a mechanism for coordination between independent businesses.

4. Review campaigns, systems and monitoring

Before launching a network-wide campaign, clarify who makes the sale, who funds the discount, how participation works and what price will be advertised to consumers. Do not assume that a temporary promotion gives you free rein to impose a uniform price: any potential justification requires a specific assessment.

Test the software in a simulated franchised outlet. Check that the operator can change prices where it is their decision to make, and that a central update does not override those choices. Advertising should clearly identify participating outlets and the terms of the offer.

Finally, establish a procedure for correcting failings within your own support team: messages demanding particular prices, technical restrictions or benefits made subject to improper conditions. Keep versions of the relevant guidance and system settings.

Practical takeaway: before marketing the franchise opportunity, review a price list, a campaign and a till configuration. If the freedom provided for in the agreement does not exist in these three areas, the pricing policy still needs work.