From manager to franchisee

It regularly happens that branch managers are invited to franchise the branch where they work. This offers opportunities, but can also entail all kinds of unforeseen risks due to the transition.

Labor law first and foremost requires that the employment contract be terminated in a careful manner. According to case law, the employer/prospective franchisor must carefully investigate whether the company manager is sufficiently informed and actually wants to give up his protection under employment law and social insurance law. It is recommended that this voluntary choice and the process leading up to it also be recorded in writing. It is also important to take plenty of time for this. In addition, self-employment should not be anticipated before all agreements have been signed.

The (additional) due care to be observed is partly due to the fact that the employee is generally in a dependent position vis-à-vis the employer/franchisor. If this process is not supervised with sufficient care, there is a risk that the termination of the employment contract may subsequently be regarded as invalid due to the lack of a will aimed at actual self-employment and/or abuse of circumstances. The employee must therefore not be lightly “tempted” into self-employment.
Also, after the choice for self-employment, something actually needs to change in the relationship. In the event of such a transition, it will have to be critically examined whether the tax authorities and the UWV have indeed started to regard the former employee as a self-employed person. To this end, it is important that the case is submitted to the aforementioned authorities in advance and that a VAR statement (WUO) is requested in good time.

Particular attention is also required when providing, or withholding, any forecasts. In some cases, forecasts are omitted on the assumption that the manager is well informed. However, that need not always be the case. After all, the question arises whether the manager has had insight into cost structures in a franchise relationship. It is therefore recommended to state explicitly why forecasts are not made. By acting in this way, the requirement of informed consent, which should be the basis for termination of the employment contract, will also be met more quickly.

This can lay the foundation for a successful franchise relationship, which will be experienced as a promotion.

Ludwig & Van Dam franchise attorneys, franchise legal advice

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