The Franchisor can control the maximum price of franchisees in some circumstances. The ability of a franchisor is dependent on the agreement.
Franchisors can often control the prices of their US franchisees within certain limits if the circumstances are correct and if the franchisors proceed properly. Historically, US antitrust laws have been a major concern for franchisors seeking to control franchisee pricing.
If a franchisor wants to implement a promotion, it can only do so when the franchise has agreed to participate.
Franchising is just one of the ways that companies distribute their products and services, locally, across the country, or around the world. And what sets it apart from all other distribution methods comes down to control and assistance.
Pricing your product at all franchises is no longer a crime.
Resale price maintenance is now decriminalized in Canada, which means that franchisors are (and, for the past five years, have been) free to set the prices at which franchisees sell goods and services.
However, franchisors have some degree of control over the price of goods sold by franchisees.
A franchisor may impose a maximum resale price, above which a franchisee would not be able to sell the products, and franchisors may also provide franchisees with a recommended price list.
Again, in doing so, franchisors must be careful not to have the indirect effect of achieving a fixed or minimum resale price.
We all know that in the franchise industry, the franchisor will seek to control almost every aspect of the franchisee’s business. But when it comes to pricing, there are significant legislative restrictions that prevent franchisors from controlling the prices charged by franchisees to the extent that they wish.
The basic principle of ensuring that all franchisees in a network operating in the same way and on the same terms are critical to a successful franchise.
This principle is essential to ensure consistency across the network and consequently to grow and safeguard the reputation of the brand. At first glance, there is no reason why this should not extend to pricing and ensure that all customers receive the same value for money, whether they buy from a franchisee
Price is often one of the key identifiers of a brand. In some industries there is a direct correlation between price and perceived quality and brands want to avoid selling their products too low for fear that people will believe that low price equals poor quality.
In contrast, some business models are based on high volume, low price, and even a small increase in the latter could significantly affect the volume and overall turnover.
For these reasons, it is easy to see why franchisors would like to control the prices at which franchisees sell goods and services to customers.