Double Vision

Modifying The System

Franchisor says: "I don't know what's going to happen in five or 10 years, so I need the right to be able to change certain things, whether that's increasing advertising fees or upgrading the units."

Franchisee says: "You can't just arbitrarily increase fees."

Solution: This should be addressed in the franchise agreement, with the key word being "reasonable," says Kushell. For example, if franchisors want to include a modification to the arrangement, they could specify a cap or some percentage, something that doesn't just give them a blank check.

For franchisors who have the right to modify, Kushell recommends they still discuss issues with franchisees before making final decisions. From the franchisees' point of view, "it's very important when they sign this agreement that they [read] through all these things," says Kushell. "If there are any red flags, that ought to be dealt with in the beginning."

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This article was originally published in the May 1997 print edition of Entrepreneur with the headline: Double Vision.

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