Franchisers Passing On More Costs

The Wall Street Journal:

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

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%.

Soaring fuel prices are pinching UPS Store franchisees. Last month, parent United Parcel Service Inc. changed its policy on refunding shipping costs to customers under its money-back guarantee for packages not delivered on time. Now, UPS won’t refund fuel surcharges added to those bills.

For an overnight envelope, those surcharges could easily be several dollars. Franchisees say customers expect to be reimbursed the full amount, and may become upset and take their business elsewhere if they don’t get it. As a result, many franchisees are digging into their own pockets to make up the difference.

Photo by UPS.

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