An entrepreneur bought a franchise to operate a restaurant. The agreement says that the entrepreneur must pay the franchisor 5% of total sales per month. Now,the franchisor insists on selling another franchise in the same market area unless the entrepreneur increases the monthly payment to 7%. This is an example of

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This situation is an example of hold-up, where one party (the franchisor) uses their bargaining power to demand more from the other party (the entrepreneur) after the initial agreement has been made. The threat of selling another franchise in the same market area puts pressure on the entrepreneur to agree to the higher monthly payment.

An Entrepreneur Bought a Franchise to Operate a Restaurant