Consider the case where the parties originally agreed to the per-unit royalty plan, where the investor receives $96 for each unit the firm sells.

After evaluating the effects of the four plans on market outcomes, including party payoffs, the parties that agreed to the per-unit royalty plan realize that they can improve their payoffs by selecting a different plan, provided they adjust the terms of the alternative plan. Which mechanism(s) should the firms adopt? How can they adjust the terms of the agreement to make both parties better off than they are under the $96-per-unit royalty plan? Terms are adjusted by, for example, changing the royalty rates on profit or revenue. They could also change the size of the franchise fee. The current payoffs set the bounds for negotiations. For example, if the investor receives $100 under the current plan, she must receive more than $100 under the new plan. Both parties must be made better off as a result of the negotiation