What happens if a Benjamin Franklin Plumbing franchisee withholds employee taxes?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
- 16.1.12 If Franchisee takes, withholds, misdirects or appropriates for Franchisee's own use any funds withheld from Franchisee's employees' wages for employees' taxes, FICA, insurance, or benefits;
In any case, you will pay to us (and to the appropriate governmental authority) such additional amounts as are necessary to provide us, after taking such taxes into account (including any additional taxes, penalties, interests or expenses), with the same amounts that we would have received or accrued had such withholding or other payment, whether by you or by us, not been required.
If you fail to withhold or pay any such obligations to the appropriate government authority, you must indemnify us for any obligations including penalties, interest, and expenses (including legal and accounting fees) resulting from your failure to timely withhold or to pay the taxes.
We will have the right: (i) to require that the individual(s) charged be removed from any active role in the Franchised Business pending final disposition of the charges; and (ii) if the person(s) charged include the Key Person, to take over operation of the Franchised Business and to manage it on your behalf pending final disposition of the charges.
You are required to provide to us upon request, or provide us with access to, all books, records, tax returns, accounting records, and supporting documents relating to the Franchised Business, including but not limited to daily cash reports, cash receipts journals, general ledgers, cash disbursement journals, weekly payroll registers, monthly bank statements, daily deposit slips, canceled checks, credit card statements, business tax returns, personal tax returns for all Owners and guarantors, supplier invoices, balance sheets, income statements, records of promotions and coupon redemptions, and lists of customers (both current and past) serviced by the Franchised Business.
Source: Item 23 — RECEIPTS (FDD pages 88–312)
What This Means (2025 FDD)
According to the 2025 Benjamin Franklin Plumbing Franchise Disclosure Document, there are significant repercussions if a franchisee withholds employee taxes. Specifically, if a Benjamin Franklin Plumbing franchisee takes, withholds, misdirects, or appropriates funds withheld from employees' wages for taxes, FICA, insurance, or benefits for their own use, it constitutes a breach of the franchise agreement.
This breach can lead to serious consequences, including potential termination of the franchise agreement. Additionally, Benjamin Franklin Plumbing has the right to seek indemnification from the franchisee for any obligations, penalties, interest, and expenses, including legal and accounting fees, resulting from the failure to properly withhold or pay these taxes. The franchisee is also obligated to pay any additional amounts necessary to ensure that Benjamin Franklin Plumbing receives the same amounts it would have accrued had the withholding or payment been properly executed.
Furthermore, the franchisor can demand that the franchisee provide access to all relevant financial records, including weekly payroll registers, to ensure compliance. The franchisor also has the right to take over operations of the franchised business if the owner is charged with a serious criminal offense, such as withholding employee taxes, and to manage it on the franchisee's behalf pending the final disposition of the charges. In such cases, Benjamin Franklin Plumbing may charge a reasonable management fee for their services.
These stipulations highlight the critical importance of adhering to proper payroll and tax procedures for any Benjamin Franklin Plumbing franchisee. Failure to do so not only risks the financial stability of the franchise but also jeopardizes the franchisee's relationship with the franchisor and potentially exposes them to legal and financial liabilities.