In Michigan, what are some examples of 'good cause' for Cinnaholic to refuse a transfer of ownership?
Cinnaholic 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 FRANCHISEE 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 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to the 2025 Cinnaholic Franchise Disclosure Document, Michigan law addresses the conditions under which Cinnaholic can refuse a transfer of ownership. Michigan prohibits franchise agreements from allowing Cinnaholic to unreasonably withhold transfer of ownership. However, Cinnaholic is permitted to refuse a transfer for 'good cause.'
The FDD specifies examples of what constitutes 'good cause'. These include situations where the proposed franchisee does not meet Cinnaholic's current reasonable qualifications or standards. Good cause also exists if the proposed transferee is a competitor of Cinnaholic. Additionally, Cinnaholic can refuse a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations, or if either the franchisee or proposed transferee has outstanding payments due to Cinnaholic or has failed to correct any existing default in the franchise agreement at the time of the proposed transfer.
It is important to note that Michigan law does not prevent Cinnaholic from exercising a right of first refusal to purchase the franchise. This means that even if a franchisee finds a suitable buyer, Cinnaholic has the option to buy the franchise themselves on the same terms and conditions. This provision is typical in franchise agreements to allow the franchisor to maintain control over the brand and its locations.