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Who controls the price of goods sold by the franchisee?
A franchisee controls the price of the goods it sells or the services it provides. Any attempt by a franchisor to set a minimum or fixed resale price within a franchise agreement or otherwise is prohibited. It is illegal for franchisors to employ practices that have the indirect effect of achieving a minimum or fixed resale price. Examples of such practices may include providing a franchisee with an incentive to sell at a certain price by printing a recommended resale price on the goods, or imposing penalties on franchisees who do not adhere to franchisors’ predetermined prices. Franchisors cannot impose promotional or discount prices on goods sold by franchisees. If a franchisor wants to implement a promotion, it can only do so where the franchisee has agreed to participate. Crucially, the franchisee must be free to opt in and out of the promotion and the franchisor should make it clear to customers that the promotion is available at participating outlets only. However, franchisors do have some degree of control over the price of goods sold by franchisees. It is possible for a franchisor to impose a maximum resale price, above which a franchisee would not be permitted to sell the goods, and franchisors may also provide franchisees with a list of recommended prices. Again, in doing so franchisors should be careful that they do not have the indirect effect of achieving a fixed or minimum resale price.
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