Franchise Self-Employment: Another Episode
In practice, it often happens that a franchisor finds it difficult to recruit new franchisees. The cause for this can be many. Particularly in the second half of the 90s, there was a general labor shortage on the labor market, which was also reflected in the availability of new franchisees. In tough economic times, potential franchisees sometimes lack the necessary capital to start a business on an independent basis.
In practice, the latter circumstance in particular is often taken care of by franchisors by allowing franchisees to start as an employee/branch holder for a certain period, after which period they become independent and continue the branch as a franchisee. The franchisee then purchases the business from the franchisor. In some cases, the purchase price is financed by the franchisor by means of a loan or similar arrangement, which allows the franchisee concerned to continue the business for his own account, even without equity, after a certain trial period.
Constructions as described above are quite workable in themselves. It is true that in such situations extra attention must be paid to the independence of the franchisee(s) involved. Naturally, it must at all times be prevented that the UWV or the tax authorities come to the conclusion during an inspection that there is a so-called fictitious employment relationship in this context: the franchisee is then not an independent entrepreneur with regard to the Social Insurance legislation and the Tax legislation. , resulting in the consequences described earlier in this section, including cancellation of social deduction options, retroactive premium levying and all kinds of possible fines. This is more pressing in this situation than elsewhere because the franchisee, in the example described above, was first an employee of the franchisor. If there is also a financing construction, the UWV and the Fiscus will take an extra critical look at the whole. In general, it is therefore strongly recommended that an informal preliminary assessment be carried out by the UWV and the Tax and Customs Administration in such situations, so that uncertainties on this point can be removed and remedied in a timely manner.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
When does a franchisor go too far when recruiting franchisees?
The judgment of the Court of Appeal of Arnhem-Leeuwarden on 5 February 2019 dealt with whether the franchisor had acted impermissibly when recruiting the franchisees.
Advisory Board on Regulatory Pressure (ATR) advises State Secretary Keijzer about the Franchise Act
In short, it is first advised to actively inform franchisors and franchisees about this amendment to the law.
Post non-competition ban on services and sales franchise
When a franchise agreement ends, many franchisees encounter a prohibition in the franchise agreement to perform similar work for a period of time thereafter
The concept of the Franchise Act: impact for franchisors and franchisees – dated February 5, 2019 – mr. AW Dolphin
Ludwig & Van Dam Advocaten believes that if the draft of the Franchise Act actually becomes law, a lot will change for franchisors and franchisees.
Buy franchise business and the laid off sick employee from 7 years ago
The question is whether a Bruna franchisee, when selling the franchise company to Bruna, should have stated that seven years ago an employee had left employment sick.
Court prohibits Domino’s unilateral area reduction when extending franchise agreements – dated January 28, 2019 – mr. RCWL Albers
On January 9, 2019, the District Court of Rotterdam rendered a judgment in a lawsuit initiated by the Association of Domino's Pizza Franchisees and all its members (almost all Domino's franchisees).