In Michigan, does the law require Bombs Away to offer a renewal provision in its franchise agreement?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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.
Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation.
This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
- (e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances.
This section does not require a renewal provision.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Michigan law does not mandate that Bombs Away include a renewal provision in its franchise agreement. However, if Bombs Away chooses not to renew a franchise, Michigan law stipulates that Bombs Away must fairly compensate the franchisee. This compensation should cover the fair market value of the franchisee's inventory, supplies, equipment, fixtures, and furnishings at the time the franchise expires.
There are exceptions to this compensation requirement. Bombs Away is not obligated to compensate for personalized materials that have no value to them. Additionally, compensation is not required for inventory, supplies, equipment, fixtures, and furnishings that are not reasonably necessary for operating the franchise.
These compensation rules apply specifically if (1) the franchise term is less than five years, and (2) the franchisee is either prohibited from continuing a similar business under a different brand in the same area after the franchise expires, or the franchisee does not receive at least six months' advance notice that Bombs Away will not be renewing the franchise. This ensures some protection for franchisees against sudden non-renewal without adequate time to adjust their business plans.