Exclusion of small businesses networked in a franchise organisation from European funding programmes

Exclusion of small businesses networked in a franchise organisation from European funding programmes

On 23 October 2020, Greek Member of the European Parliament (MEP) Anna-Michelle Asimakopoulou of the Group of the European People’s Party (Christian Democrats) posed a written parliamentary question to the European Commission:

“In view of the measures adopted in response to the coronavirus pandemic, Greece’s Ministry of Development and Investment has launched a number of actions through the NSRF 2014-2020 operational programme. A new programme called ‘Supporting small and micro-enterprises affected by COVID-19’ will provide substantial support in the form of a non-repayable grant to small businesses facing serious liquidity problems as a result of measures to counter the spread of the virus.

On 20 October 2020, a question by Greek MP Vasilis Spanakis revealed that small businesses networked in a franchise organisation are excluded from the above programme.

This unjustified exclusion is contrary to the rules on equal opportunity and fair competition, as the businesses concerned are classified as small or micro-enterprises on the basis of specific criteria, are engaged in an activity with a Code of Activity Number with the beneficiaries, have their own tax identification number and are proven to belong to business sectors affected by the spread of the virus.

In view of this, can the Commission say:

Does the EU regulatory framework exclude micro, small and medium-sized enterprises belonging to franchises from European funding programmes, even though they meet the established criteria and are autonomous legal entities with their own tax identification number?”

On 25 January 2021, Cohesion and Reforms Commissioner Elisa Ferreira responded on behalf of the European Commission stating: “Whether enterprises with a franchise are considered as linked to their franchisor depends on the terms of each individual franchising agreement.

As long as the franchising agreement does not create one of the four linked relationships listed in the definition of small and medium-sized enterprises (SMEs), the franchisee remains autonomous and thus may qualify as a SME.

Within the temporary framework to support the economy in the context of the coronavirus outbreak, Member States may give state aid to all kinds of undertakings — also those that are not considered SMEs according to the abovementioned definition.

In line with the currently applicable Common Provisions Regulation, every cohesion policy operational programme defines specific objectives, the type of actions, main target groups and beneficiaries to be supported.

The managing authority of a programme applies appropriate selection criteria and methods that cover certain sectors or types of beneficiaries, which must be duly justified and in line with the programme.

The national managing authorities launched the specific call according to the state aid measure that Greek authorities had notified to the Commission.

The Greek authorities have later applied for an extension of the scope of the measure to include undertakings with a franchise. The Commission approved that amendment by decision of 4 December 2020 in case SA.59672.”

Source: https://www.europarl.europa.eu/doceo/document/E-9-2020-005758_EN.html

Photo Credit : https://pixabay.com/photos/corona-fund-money-5206409/

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