Franchising in Taiwan: Setting Clear Rules on Store Pricing and Promotional Participation

When opening an existing business in Taiwan to franchising, headquarters may be tempted to hand franchisees its company-owned stores’ price lists, membership discounts and seasonal offers, and require them to follow suit. Yet franchise outlets face different rent, staffing and delivery costs, so uniform pricing does not necessarily mean a fair arrangement. To build a stable franchise network, headquarters should clarify three things before recruitment begins: who has the right to set prices, who pays for offers, and how stores choose whether to participate.

1. Distinguish Brand Standards from Pricing Restrictions

Headquarters can specify product standards, service procedures and brand presentation. However, it should not assume that this automatically gives it the right to control the prices franchisees charge customers. Whether franchisees operate independently, how products are supplied and who completes each transaction all affect the legal assessment. A contractual reference to ‘centralised management’ is not enough to settle the issue.

Taiwan has no single franchise-specific law covering every aspect of franchising, but that does not mean franchises are free from specific regulation. The Fair Trade Commission’s Guidelines on the Business Practices of Franchisors address the disclosure of important franchise information and contracting procedures. Pricing arrangements must also comply with the Fair Trade Act, while contractual rights and obligations are subject to provisions including those of the Civil Code.

Article 19 of the Fair Trade Act generally prohibits businesses from restricting the prices at which their trading partners resell supplied goods to third parties or at subsequent stages of resale, unless there are justifiable grounds. The relevant provisions also apply to services. Whether a particular franchise arrangement constitutes a restriction, and whether it has justifiable grounds, depends on the facts of the trading relationship. Uniform pricing cannot simply be classified as lawful or unlawful in every case.

A ‘recommended price’ should genuinely be a recommendation. If a franchise outlet faces suspended supplies, withheld rebates or refusal of renewal for departing from a recommended price, the arrangement may still amount to an effective restriction, even if the documents use the word ‘recommended’. Headquarters should ask a lawyer familiar with Taiwan’s fair trade rules to review the contract, till system settings and actual management practices, rather than merely rename contractual clauses.

2. Make Pricing Rights Work in Systems and Daily Operations

Start by listing every place where prices appear: in-store menus, till systems, the brand website, membership apps, delivery platforms and advertising materials. For each one, establish who enters prices, who can change them and which channels receive updates when a price changes.

An internal pricing authority matrix should answer at least the following questions:

• Everyday prices: Once headquarters has provided reference prices, how can franchise outlets set their own?
• Price differences between channels: If in-store and delivery prices differ, how will this be made clear to customers?
• Information updates: When a store changes a price, who updates price lists, systems and promotional pages?
• Pricing errors: If a system or promotional material contains an error, who receives the report and corrects it?

For example, if a franchisee is permitted to set its own prices but headquarters’ system automatically resets a changed product price every night, its autonomy exists only on paper. During testing, use a franchise outlet’s account to change a price and check the permissions, synchronisation and displayed results.

Price-change notifications can help maintain accurate information and support customer communication, but they should not quietly become an approval process. Any arrangement involving price floors or ceilings, minimum advertised prices or discount restrictions should undergo a separate legal assessment, rather than being treated as an ordinary brand standard.

3. Explain Choices and Costs Before Each Promotion

Promotional disputes often arise not from the discount itself, but because franchisees only discover after launch that they must fund the offer, platform fees and extra staffing. Before publishing promotional material, headquarters should provide stores with a campaign brief so franchisees can make an informed assessment. Receiving a notification should not be treated as consent.

The campaign brief should include:

• Campaign dates, eligible products, sales channels and whether offers can be combined;
• How to participate, the response deadline and arrangements for withdrawing before the campaign starts;
• How the costs of discounts, free gifts, platform charges and advertising will be shared;
• How subsidies are calculated, the supporting records required for reconciliation and payment timings;
• Procedures for refunds, cancelled orders and vouchers redeemed at different stores.

When assessing costs, do not look only at turnover after discounts. Include ingredients or materials, packaging, payment or platform charges, and any additional staffing costs generated by the campaign, based on the actual arrangements. This helps franchisees judge whether they can afford to participate; it is not a promise that the promotion will generate a profit.

If participation is voluntary, stores that decline should not lose existing support or face other adverse treatment. Whether participation in certain brand campaigns is compulsory, and how prices will be set, should be explained during recruitment and reviewed legally. Advance disclosure or a signed agreement cannot make an unlawful restriction lawful.

4. Keep Contracts, Advertising and Settlement Consistent

The franchise agreement should clearly set out the basic principles governing pricing and promotions, with the specific terms of individual campaigns recorded in confirmation documents. Avoid simply stating that ‘franchise outlets must cooperate with all headquarters promotions’ while leaving headquarters to decide all charges, discounts and campaign durations unilaterally.

Under the Fair Trade Commission’s franchise guidelines, fees payable during the franchise term and restrictions on the business relationship are among the important matters requiring careful disclosure. If promotional arrangements involve fixed cost contributions, system fees or other ongoing financial commitments, these should be included in the relevant pre-contract information, not hidden in a campaign handbook supplied later.

Customer-facing advertising must also reflect the actual arrangements. If only some franchise outlets are participating, do not claim that an offer is ‘available at all stores across Taiwan’. Restrictions relating to channels, dates or quantities should also be clearly displayed to avoid false or misleading representations of the kind regulated by Article 21 of the Fair Trade Act.

Before the full launch, run an end-to-end test: a store confirms participation, the system applies the offer, a customer pays, an order is refunded, and the final settlement received by the franchise outlet is checked. Keep campaign versions, confirmation records and reconciliation results so that any problem can be traced to the rules, the system or their implementation.

Practical takeaway: before launching a franchise offer, complete a pricing authority matrix, a guide to promotional participation and a settlement test. Giving franchisees a clear understanding of what they can decide and what costs they must bear will do more to sustain trust across the network than simply requiring every store to display the same prices.