In Michigan, does Beehive Homes have a right of first refusal to purchase the assets of a franchisee?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to: (i) The failure of the proposed transferee to meet the franchisor's then current reasonable qualifications or standards. (ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor. (iii) The unwillingness of the proposed transferee to agree in writing
to comply with all lawful obligations. (iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
- (h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchisee on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchisee for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, Michigan law addresses the franchisor's right of first refusal. Specifically, Michigan law does not prevent Beehive Homes from exercising a right of first refusal to purchase a franchise. This means that if a franchisee in Michigan decides to sell their franchise, Beehive Homes has the first opportunity to buy it, before the franchisee can sell to a third party.
However, the FDD also states that Michigan prohibits certain unfair provisions in franchise documents. One such provision is related to the franchisor requiring the franchisee to resell items that are not uniquely identified with the franchisor. However, this prohibition does not apply to a provision that grants Beehive Homes a right of first refusal to purchase the assets of a franchisee on the same terms and conditions as a bona fide third party willing and able to purchase those assets. It also does not prohibit Beehive Homes from acquiring the assets of a franchisee for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach.
In practical terms, this means that if a Beehive Homes franchisee in Michigan wants to sell their franchise, they must first offer it to Beehive Homes on the same terms that a third-party buyer is offering. Beehive Homes can then choose to purchase the franchise on those terms. This right is subject to certain conditions and limitations under Michigan law, particularly concerning breaches of the franchise agreement and the terms of the offer. This clause ensures that Beehive Homes has the opportunity to maintain control over its franchise locations and brand integrity.
Prospective franchisees in Michigan should carefully review the franchise agreement and understand the specific terms and conditions related to the right of first refusal, including how the purchase price is determined and the process for exercising the right. They should also be aware of their rights and obligations under Michigan franchise law, particularly regarding unfair provisions and the franchisor's ability to purchase the franchise in the event of a breach of contract.