In Michigan, are personalized materials that have no value to Bombs Away subject to compensation upon non-renewal of a franchise?
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.
Source: Item 23 — RECEIPTS (FDD pages 36–117)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, Michigan law addresses compensation for franchisees upon non-renewal. Specifically, if the franchise agreement allows Bombs Away to refuse renewal, Michigan law may require Bombs Away to fairly compensate the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings at the time of expiration.
However, this compensation requirement does not extend to personalized materials that hold no value for Bombs Away. Additionally, compensation is not required for inventory, supplies, equipment, fixtures, and furnishings that are not reasonably required for conducting the Bombs Away franchise business.
This protection for franchisees in Michigan applies only under specific conditions: (1) if the franchise term is less than 5 years, and (2) if the franchisee is either prohibited from operating a similar business under a different brand in the same area after the franchise expires, OR if the franchisee does not receive at least 6 months' advance notice that Bombs Away intends not to renew the franchise agreement. Therefore, franchisees should carefully review their franchise agreement and consider these stipulations regarding non-renewal and compensation.