Franchise Pricing in Taiwan: Checking Uniform Prices, Mandatory Promotions and Discount Cost-Sharing

When entering Taiwan’s franchise market, brand consistency matters, but policies such as ‘the same price across Taiwan’ and ‘all outlets must participate’ also affect your freedom to run your outlet. When choosing a brand, look beyond franchise fees and ask: who sets prices, who approves discounts, and who pays for promotions? The answers should not rest on verbal assurances from franchise recruitment staff. You should be able to verify them in the agreement and its supporting documents.

1. Distinguish recommended prices from actual pricing restrictions

Do not assume that a price list labelled ‘recommended retail prices’ gives you freedom to adjust prices. Check the agreement, operations manual, till settings and outlet inspection requirements together to establish what happens if you depart from the recommended prices.

Ask the franchisor each of the following questions:

• Can outlets adjust prices to reflect differences in rent, ingredient costs or local customers?
• Is prior approval required for both price increases and reductions?
• Are discounts, member offers or meal bundles funded by the outlet also restricted?
• Could departing from the franchisor’s prices lead to financial deductions, suspended supplies or a finding that you have breached the agreement?

What matters is the restriction in practice, not simply the wording used to describe it. If the franchisor says prices are only a guide but uses deductions or supply suspensions to enforce them, further scrutiny is needed. Ask for written clarification of which prices are recommendations, which are requirements, and the conditions and response deadlines for requesting exceptions.

When comparing brands, also ask existing franchisees how price changes work in practice. A one-off approval does not mean every outlet has the same rights, but it can help reveal whether written rules match day-to-day enforcement.

2. Understand Taiwan’s disclosure and pricing restriction rules

Taiwan has no single, comprehensive law specifically governing franchise relationships, but that does not mean franchising is unregulated. Rights and obligations under franchise agreements fall within the scope of the Civil Code, while franchise recruitment disclosures and competitive conduct are governed by legislation including the Fair Trade Act.

Point 3 of the Fair Trade Commission’s principles for handling cases involving franchisors requires franchisors to provide important franchise information ten days before entering into a franchise or preliminary franchise relationship, within a period considered reasonable in the particular case, or within a period agreed by both parties. This information includes ongoing operating fees and restrictions on the franchise relationship during the agreement’s term. Ask the franchisor to explain arrangements affecting outlet pricing and promotional costs in detail before signing, rather than leaving them to be announced after you open.

Under these principles, failing without proper justification to provide required information may breach Article 25 of the Fair Trade Act where it constitutes obviously unfair conduct sufficient to affect trading order. This does not mean that every disclosure shortcoming automatically invalidates the entire agreement.

Article 19 of the Fair Trade Act also generally prohibits restricting the prices at which trading counterparties resell goods, unless there is proper justification; the relevant provisions also apply to services. Whether a franchise network’s pricing arrangements are unlawful depends on the actual trading relationship, how restrictions are imposed and the reasons for them. A clause is not necessarily lawful simply because it appears in the agreement, nor can uniform pricing requirements be declared unlawful without considering the circumstances. Have pricing clauses backed by penalties reviewed by a lawyer familiar with Taiwanese competition law before signing.

3. Break promotional promises down into verifiable costs

‘The franchisor handles marketing’ does not mean the franchisor pays for discounts. Nor does ‘the offer is subsidised by the franchisor’ necessarily cover free products, packaging or extra staff. Pricing rights and promotional costs need to be assessed together.

Ask the franchisor for the full terms of a previous campaign and an anonymised settlement example, then clarify each of the following:

• Discount amount: Does the franchisor, the outlet or both cover the amount the customer saves?
• Free products: Who pays for the ingredients, packaging and delivery of complimentary items?
• Combining offers: Can discounts be used alongside loyalty points, vouchers or other promotions?
• Subsidy settlement: Are payments calculated using actual redemptions or other records? When are they paid, and how can discrepancies be challenged?
• Royalty calculation: Are royalties based on the original price or the amount actually received after the discount? Are subsidies included in turnover?

For example, a buy-one-get-one-free promotion may increase an outlet’s ingredient and packaging costs even if no additional franchise fee is charged for the second item. Higher order volumes alone do not prove that a campaign is profitable. Calculate the money received, subsidies, direct costs and any related percentage-based charges separately for each order.

The aim here is to check the financial burden of an individual promotion, not merely whether you contribute to an advertising fund. Both costs may apply at the same time; one does not replace the other.

4. Set out participation rules and exceptions in writing

Before signing, ideally ask for an appendix distinguishing mandatory campaigns, voluntary campaigns and outlet-led promotions. If the franchisor simply states that ‘franchisees must participate in all promotions’, negotiate further on notice periods, campaign duration, cost calculations and whether there is a cap on the outlet’s contribution.

For future campaigns whose details have yet to be decided, you can ask for a provision requiring the franchisor to supply the campaign rules and cost information first, and to obtain separate written consent from the outlet if its contribution would exceed the agreed limit. This is a contractual safeguard you can negotiate, not an automatic legal right to opt out.

Exceptions should also be addressed in advance. For example, if ingredients run short, equipment fails or an outlet cannot legally supply a particular product, can it suspend participation? How should customers be notified, and who is responsible for updating promotional materials? Avoid a situation in which the outlet cannot honour an offer but is nevertheless accused of breaching the agreement by not participating.

Do not settle for ‘we have always worked things out in the past’. Ask the franchisor to specify in writing who approves requests, how applications are submitted and the time limit for handling them. Also confirm which document takes precedence if campaign terms conflict with the main agreement.

Practical takeaway: before signing, choose a real promotion and work through the entire process of pricing, participation, cost-sharing, redemption and subsidy payment. Having written terms to refer to at every stage makes it easier to judge whether the brand’s pricing policy suits your outlet.