What happens if a payment due from the Bevaris Alliance Franchisee is subject to tax?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
- 21.5 If a payment due from Franchisee under this clause is subject to tax (whether by way of direct assessment or withholding at its source), Franchisor shall be entitled to receive from Franchisee such amounts as shall ensure that the net receipt, after tax, to Franchisor in respect of the payment is the same as it would have been were the payment not subject to tax.
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to the 2024 Bevaris Alliance Franchise Disclosure Document, if any payment due from a franchisee is subject to tax, whether through direct assessment or withholding at the source, Bevaris Alliance is entitled to receive from the franchisee an amount that ensures the net receipt, after tax, is the same as it would have been if the payment were not subject to tax.
This clause ensures that Bevaris Alliance receives the full amount it is due, regardless of any tax implications imposed on the franchisee's payment. In essence, the franchisee is responsible for covering any taxes associated with their payments to Bevaris Alliance, so that the franchisor's net income remains unaffected by these taxes.
This type of provision is relatively common in franchise agreements. It protects the franchisor's revenue stream from being diminished by taxes levied on payments from franchisees. Prospective franchisees should be aware of this obligation and factor it into their financial planning, as it means they may be responsible for additional costs beyond the stated fees and royalties.