Franchise pricing: rules to establish before expanding in Slovenia

When an established business prepares to expand through a franchise network, it often wants to maintain uniform prices. In company-owned outlets, this is a routine business decision. With independent franchisees, however, it can become a competition law issue. Before signing the first agreement, establish who decides final selling prices, how joint promotions are organised and what the point-of-sale system must allow. A consistent brand identity does not give you an unrestricted right to set prices for other businesses.

1. Distinguish between company-owned outlets and independent partners

A franchisee generally trades in its own name and for its own account. Although it uses your brand and business concept, it is not simply the manager of one of your outlets. Setting its selling prices is therefore not the same as setting prices at an outlet directly operated by your company.

Slovenia has no dedicated franchising act, mandatory franchise register or statutory franchise disclosure document. This does not mean there is a legal vacuum. Contractual relationships are governed primarily by the Obligations Code, company formation and operations by the Companies Act, and trade marks by the Industrial Property Act. The Prevention of Restriction of Competition Act (ZPOmK-2) is particularly important for pricing arrangements.

Where an agreement may affect trade between EU Member States, Article 101 of the Treaty on the Functioning of the European Union also applies. Commission Regulation (EU) 2022/720 and the European Commission’s accompanying guidelines provide an important framework for assessing vertical agreements.

The European Code of Ethics for Franchising is a self-regulatory framework, not Slovenian law or permission to restrict competition. Before expanding, have a lawyer review how sales actually work, rather than just the title of the agreement.

2. Distinguish between recommended, maximum and mandatory prices

The greatest risk lies in setting fixed or minimum resale prices. This extends beyond contractual clauses requiring a partner to use your price list. Banning discounts, setting a maximum permitted discount or withdrawing benefits from a partner that sells at lower prices can also be problematic.

Recommended and maximum selling prices are generally more likely to be permissible, but pressure or incentives must not turn them into fixed or minimum prices. A recommendation is not genuinely voluntary if failure to follow it triggers a warning that the agreement may be terminated.

Regulation 2022/720 provides a block exemption where its conditions are met. These generally include a market share of no more than 30% for both the supplier and the buyer on their respective relevant markets. Restricting the buyer’s ability to determine its selling price is generally a hardcore restriction that prevents reliance on this exemption. Exceeding the market share threshold does not, in itself, make an agreement unlawful; an individual assessment is required.

Your draft pricing rules should therefore clearly distinguish between:

• a recommended price, which the partner is free to depart from independently;
• a maximum price, which leaves the partner free to sell at a lower price;
• a wholesale price, which you charge the partner and which is not the price it charges the customer.

A minimum advertised price can also amount to indirect minimum resale price maintenance. Do not treat it as a supposedly safe alternative to a mandatory price list.

3. Plan joint promotions before advertising them

Problems often arise when a franchisor advertises a promotion first and only then tells partners what price they must charge. This creates pressure and risks promising customers an offer that is not available at every location.

Prepare a short implementation plan for each promotion in advance. Specify the participating locations, promotional period, products, funding arrangements and process for confirming participation. If the promotion uses a recommended price, the partner must genuinely be able to choose a different price in practice.

When announcing price reductions, comply with Slovenia’s Consumer Protection Act (ZVPot-1). A reduction in the price of goods generally requires the previous price to be displayed as well: this is the lowest price applied during the preceding 30 days, subject to the specific statutory rules. If partners have different pricing histories, centrally produced discount labels may not be correct for all of them.

Do not assume that short-term promotions with a common fixed price are automatically exempt. Any individual justification requires a specific legal and economic assessment. For a typical franchise expansion, it is better to develop a workable model that does not depend on proving such a justification.

4. Check the agreement, software and day-to-day practice

A contractual provision allowing independent pricing is of little help if the point-of-sale system technically prevents the partner from changing prices. Before bringing your first franchisee on board, review the entire process, from entering a product centrally to issuing the customer’s receipt.

In particular, check:

• whether the partner can change a recommended price without head office approval;
• whether a central update overrides the partner’s pricing decision;
• whether the online shop clearly identifies the seller and the applicable terms;
• whether price monitoring leads to penalties for departures from recommended prices;
• whether staff send partners messages that turn recommendations into requirements.

Do not use partners to coordinate future prices with one another. A franchise network meeting must not become a forum for agreeing that nobody will offer a lower price. Limit access to commercially sensitive information to legitimate needs.

Practical takeaway: before launching your first franchise, draw up a short set of selling-price rules and align your agreement, advertising and point-of-sale system with them. The most important test is simple: can an independent partner actually set its own selling prices without unlawful pressure?