Under what conditions can Bombs Away refuse a transfer of ownership of a franchise 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, certain provisions are void and unenforceable in Michigan, including those that allow the franchisor to unreasonably deny a transfer of ownership. Specifically, Bombs Away cannot refuse a transfer of ownership of a franchise except for "good cause."
Good cause, as defined within the Michigan addendum, includes several conditions. Bombs Away can refuse a transfer if the proposed transferee does not meet the franchisor's current reasonable qualifications or standards. Another reason for refusal is if the proposed transferee is a competitor of Bombs Away or its subfranchisor. Additionally, Bombs Away can block a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations.
Finally, Bombs Away can refuse a transfer if either the current franchisee or the proposed transferee has not paid all sums owed to Bombs Away or has failed to correct any existing default in the franchise agreement at the time of the proposed transfer. These stipulations ensure that Bombs Away maintains control over who becomes a franchisee while also protecting the franchisee from arbitrary denial of a transfer.