Franchise players really aren't that bad.
#1, as far as we know, not every team needs to declare a franchise player. If you have a floor, small market teams aren't going to declare a franchise player and make it even harder for themselves to reach the floor. I would guess that as many as 10 teams won't have a franchise player. This thing might only affect around 20 players in the entire league...which does not have an affect on the overall market.
Second, I don't get why some people here say cap is $38.5 million, so now with the franchise player it is $48.5 million. How many players in the league make $10 million? What makes you think teams are going to franchise all these guys, especially if conditions come with it, such as tax on the franchise salary? I would say out of the 15-25 players that are franchised every year, the average player will only make maybe $5 or $6 million. I think you are looking at a situation where even if 10 teams use the franchise exemption to spend past the cap, they are only going to be spending aroud $45 million. $30 million to $45 million is not a problem as far as parity and competition goes.
Last, I don't think these 20 or so franchise players will have any affect on the overall market for salaries at all. FA's aren't going to be able to go to a team with a current franchise player and say "pay me as much as he makes, I'm just as good". One reason for this is that a team which currently has a franchise player a) can't have another one obviously, so it would be ridiculous for an FA to demand the salary of one and b) the team would probably be over the cap if they payed another player that much money. There would basically be no comparisons to a current franchise player for these 2 reasons, and that FA can't turn aroud and go to the other 10 teams without franchise players because those teams aren't going to be declaring one.
One change I would make though is that franchise salaries should be capped. Taxing them at 50% is a good idea, but still, the Leafs could pay a player $20 mill a season and have a $68 mil payroll overall. I say have a franchise salary cap at $10 million, and franchise salaries are taxed 50%