What constitutes 'good cause' for Bombs Away to refuse a transfer of ownership in Michigan?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 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.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Michigan law stipulates specific conditions under which Bombs Away can refuse a franchise transfer. These conditions are considered 'good cause' and are legally permissible reasons for Bombs Away to deny a proposed transfer of ownership.
Specifically, Bombs Away may refuse a transfer if the proposed transferee does not meet the brand's current reasonable qualifications or standards. This ensures that any new franchisee maintains the standards expected by Bombs Away. Another valid reason for refusal is if the proposed transferee is a competitor of Bombs Away, which prevents potential conflicts of interest and protects Bombs Away's competitive position.
Additionally, Bombs Away can refuse a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations associated with the franchise agreement. This ensures that the new franchisee is committed to upholding the terms and conditions of the franchise. Finally, Bombs Away has grounds to refuse a transfer if either the current franchisee or the proposed transferee has outstanding payments due to Bombs Away or has failed to correct any existing defaults in the franchise agreement at the time of the proposed transfer. This protects Bombs Away's financial interests and ensures compliance with the franchise agreement.
It is important to note that Michigan law also grants Bombs Away the right of first refusal to purchase the franchise, meaning Bombs Away can choose to buy the franchise back itself before allowing a transfer to a third party. These regulations aim to balance the rights of both the franchisor and the franchisee during franchise transfers in Michigan.