If a Beehive Homes franchisee is prohibited from continuing the same business after the franchise expires, what conditions trigger compensation?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
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THE FOLLOWING APPLY ONLY TO TRANSACTIONS GOVERNED BY THE MICHIGAN FRANCHISE INVESTMENT LAW
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
- (a) A prohibition of the right of a franchisee to join an association of franchisees.
- (b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
- (c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
- (d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings.
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, specific conditions must be met to trigger compensation if a franchisee is prohibited from continuing the same business after the franchise term. This protection applies specifically to transactions governed by Michigan Franchise Investment Law.
For Michigan franchisees, compensation is required if (i) the franchise term is less than 5 years, and (ii) the franchisee is prohibited by the franchise agreement from continuing to conduct substantially the same business under a different trademark in the same area after the franchise expires. Alternatively, compensation is also required if the franchisee does not receive at least 6 months' advance notice of Beehive Homes' intent not to renew the franchise. If these conditions are met, Beehive Homes must fairly compensate the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings at the time of expiration.
However, the compensation requirement does not extend to personalized materials that have no value to Beehive Homes. Additionally, inventory, supplies, equipment, fixtures, and furnishings not reasonably required for conducting the Beehive Homes franchise business are also excluded from compensation. This provision ensures that franchisees in Michigan are protected from unfair non-renewal practices, while also setting limitations on the types of assets that qualify for compensation.