Tax reform weighs differently on franchisors and franchisees
According to Seu Dinheiro, royalties and franchise fees may rise for franchisors, while franchisees evaluate Simples Nacional against another regime.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM SEU DINHEIRO · 2 MIN
Tax reform does not reach all franchise chains in the same way. According to Seu Dinheiro, the effect depends on the place the company occupies in the chain: whether it charges royalties and franchise fees, or whether it operates the store that sells to consumers.
For franchisors, the sensitive point is the revenue from royalties and franchise fees. According to Your Money, taxation on these items can rise significantly. The same report reminds us that the provision of services and specialized labor are important parts of this operation, which makes the calculation less simple than a percentage charge.
Franchisees face another equation. Most of them operate in retail and sell directly to the end consumer, which leaves them faced with a decision on the tax regime. According to Seu Dinheiro, they can continue with Simples Nacional or migrate to a regime with more tax credits.
It is this asymmetry that gives weight to the theme. Those who charge royalties feel the change in their own revenue, while those who sell at the high end feel the effect on the choice of framing. In other words, the same reform can produce opposite results within the same network.
The question that remains is how this bill will be divided between the franchisor and franchisee, since the two parties depend on each other to keep the network running.
What changes for the investor
For those who follow companies in the sector, the most useful reading is to separate companies that live off royalties and fees from those that depend on retail sales, because the tax effect arrives through different paths. An increase in taxation on royalties and fees could put pressure on franchisors' revenue, while the choice of regime influences the profitability of those who operate the stores. This is a scenario of possible impact, and not a price forecast. It is worth monitoring how each company comments on the topic in its results and how the final rule will be applied.
Automatically translated from Portuguese.
