I've often wondered about Franchises, what happens come tax return time? For example, lets use "Ian Lancaster". One of his franchisees filling in his tax form answers the "what name do you trade as..?" Ian Lancaster , yes ? Are you in a partnership ? Answer is yes, or sort of ?
No. That's the whole point about franchising.
Each franchise is a separate business in its own right. Franchising has been around for an awful long time, so any problems like that were ironed out long before I got involved.
Each franchisee fills in his own tax return, based on the value of the work he has done in the accounting period. My income is royalties from the franchisees, for which I invoice them. Because we are all separate businesses we only attract VAT if our individual turnover exceeds the limit. It is quite possible for a franchisee to be VAT registered but the franchisor (me) not - the total I receive from all my franchisees doesn't exceed the VAT limit.
In reply to all the people who can't understand why anyone would want to buy a franchise as it's "so easy to start up for yourself" when we take on a new franchisee, I tell them exactly that - there are thousands of window cleaners out there who all started up by themselves, anyone can do it, so why would you (the prospective franchisee) want to pay to join us? The answer is always "because I like the idea of you guaranteeing me as much work as I can handle and I worry I wouldn't be able to manage that on my own".
I then tell them that if they do join us, there is no way they will ever own any of the work we find for them and even more, any work that they pick up is ours, not theirs. Even after this (and I try very hard to dissuade them - I don't want people who aren't committed) they still want to sign up. I've only ever had one who thought it over then decided to go it alone.
