Owners Say Franchisers Are Passing on More Costs

Richard Gibson:

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

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%.

Franchisees of Hollywood Tans LLC, an upscale tanning salon chain, say the company is billing them for maintenance on some equipment they had purchased under warranties that covered servicing charges.

"They're reclassifying what had been normal wear and tear [and] we now have to pick up" the cost on items such as fans and booth door locks, says Jeff Wogan, who operates a salon in Ranson, W.Va., and is a member of the franchisee owners' association. He adds that it can take days for someone to show up to fix items, partly because the company's maintenance crew has been downsized.