International Law

Franchisers Passing on Costs to Franchisees

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The Wall Street Journal reports on the exercise of the franchisor's discretion.

"Some franchisees say they are being forced to pay for a variety of expenses for the first time -- making difficult economic times even tougher.

McDonald's franchisees contend they have to take on some expenses once covered by their franchisers.

For instance, operators of McDonald's Corp. restaurants, under pressure from the fast-food giant to install equipment and counter space for an array of new beverages, complain that they have to pay for nearly half the upgrade's architectural and engineering fees -- items the company used to cover.

Franchisees put those added fees at several thousand dollars, and some say the entire project has yet to be cost-justified.

McDonald's acknowledges that in the past it has paid for architectural and engineering work done when an individual franchisee made construction improvements to a restaurant.

But because the beverage project is systemwide and so substantial, those costs are now part of the expenses that McDonald's will cover at only 40%."

Full post as published by Misleading Advertising Law on November 07, 2008 (boomark / email).