In Michigan, can Brueggers Bagels exercise a right of first refusal to purchase a franchise?
Brueggers_Bagels 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 franchise 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 franchise 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 61–335)
What This Means (2025 FDD)
According to Brueggers Bagels's 2025 Franchise Disclosure Document, Michigan law addresses a franchisor's right of first refusal when a franchisee seeks to transfer ownership. Specifically, Michigan law does not prevent Brueggers Bagels from exercising a right of first refusal to purchase the franchise. This means that if a franchisee decides to sell their Brueggers Bagels franchise, Brueggers Bagels has the first option to buy it themselves, before the franchisee can sell to another buyer.
However, Michigan law also stipulates conditions under which Brueggers Bagels can refuse a transfer of ownership. These conditions constitute "good cause" and include situations where the proposed buyer doesn't meet Brueggers Bagels's standards, is a competitor, is unwilling to comply with obligations, or if there are outstanding payments or defaults.
Additionally, Michigan law addresses the repurchase of assets. It states that Brueggers Bagels is not required to repurchase items that are not uniquely identified with the franchisor. However, this does not prohibit Brueggers Bagels from having a right of first refusal to purchase the assets of a franchise if a third party is willing to buy them. Brueggers Bagels also has the right to acquire the assets at market or appraised value if the franchisee has breached the franchise agreement and failed to correct the breach.