Setting Selling Prices When Franchising a Business in Spain

When you franchise your business, the price you set for your own outlet cannot automatically become an instruction for everyone else. Franchisees are independent business owners: sharing a brand does not remove their commercial autonomy. Before bringing new members into your franchise network, you need a pricing policy that distinguishes between recommendations, permitted limits and prohibited practices.

1. Distinguish your prices from those of your franchisees

You can set selling prices in your company-owned outlets. In outlets run by independent business owners, imposing fixed or minimum resale prices generally constitutes a serious restriction of competition. Brand consistency alone is not sufficient justification.

The relevant framework includes Spain’s Competition Act (Law 15/2007) and, where trade between EU Member States may be affected, Article 101 of the Treaty on the Functioning of the European Union. Regulation (EU) 2022/720, on vertical agreements, and the accompanying European Commission Guidelines are essential references when assessing these clauses.

Subject to its conditions, the Regulation permits recommended or maximum prices, provided they do not become fixed or minimum prices through pressure or incentives. Among other requirements, its block exemption requires the supplier’s and buyer’s market shares each to be no more than 30%. Exceeding that threshold does not automatically make an agreement unlawful, but it does require an individual assessment.

Before drafting the contract, classify each proposal:

• Recommended price: guidance that the franchisee is free to accept or reject.
• Maximum price: a ceiling that must allow the franchisee to sell below it.
• Fixed or minimum price: an obligation to maintain a particular price or not to sell below it, normally incompatible with competition rules.

2. Identify indirect price restrictions

Calling a price ‘recommended’ does not solve the problem if your conduct makes it compulsory. What matters is how the system works in practice, not just the heading on a price list.

Check for mechanisms such as:

• Withdrawing commercial benefits from franchisees who sell below the suggested price.
• Warning of contractual consequences for offering their own discounts.
• Technically restricting the ability to change prices in the point-of-sale system.
• Setting the maximum discount each outlet may offer.
• Requiring a minimum advertised price, even if a lower price may be charged at checkout.

These practices may constitute indirect forms of resale price maintenance. Using complaints from other franchisees to put pressure on those charging less is also risky.

Make commercial freedom a genuine option. If you distribute a recommended price list, explain that it is non-binding and check that the management software allows prices to be changed. Train your franchise development team and anyone who visits outlets: no verbal instruction should undermine that autonomy.

3. Design promotions that can be run lawfully

A network-wide campaign requires more preparation than simply sending out a poster displaying a price. Before announcing it, establish who is selling to the consumer, who will bear the cost of the discount and which outlets are taking part.

For a voluntary promotion, prepare a brief covering dates, products, advertising materials, participation terms and order handling. Participation must be genuinely voluntary: declining to take part should not lead to disguised reprisals.

If you propose a maximum promotional price, check that franchisees can charge less and that the agreement as a whole complies with competition rules. A maximum that effectively operates as a single fixed price needs legal review.

The European Commission Guidelines recognise that certain coordinated, short-term low-price campaigns may warrant a specific assessment of their efficiency benefits. This is not blanket permission to impose promotions: any exception requires evidence that its conditions are met, not simply an appeal to the brand’s interests.

For online sales, also identify who enters into the sales contract and issues the invoice. An order coming through a shared website does not, in itself, mean that head office can dictate the price of a sale made by a franchisee.

4. Align your contract, tools and communications

Spain does have specific franchise legislation: Article 62 of the Retail Trade Act (Law 7/1996) and the provisions of Royal Decree 201/2010 that remain in force. This framework does not replace competition rules or authorise the imposition of resale prices.

Before offering your franchise model, commission a coordinated review of the contract, commercial terms, campaigns and IT configuration. If you show prospective franchisees indicative prices to explain the business’s financial model, avoid describing them as compulsory or as a guarantee of profit margins.

Appoint someone to approve commercial instructions and retain copies of the versions sent out. Review franchise network meetings too: they must not become a forum for franchisees to agree future prices or common discounts.

Practical takeaway: before franchising, test three actions: changing a recommended price, declining a promotion and offering an independently chosen discount. If the system blocks any of them or triggers penalties, review your policy before bringing your first franchisee on board.