In Michigan, can Cinnaholic prevent a transfer of ownership if the franchisee or proposed transferee has unpaid sums owing to the franchisor?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
THE FRANCHISEE FROM ENTERING INTO AN AGREEMENT, AT THE TIME OF ARBITRATION, TO CONDUCT ARBITRATION AT A LOCATION OUTSIDE THIS STATE.
- (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.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 27–35)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Michigan law addresses the conditions under which Cinnaholic can prevent a transfer of ownership. Specifically, Cinnaholic is permitted to refuse a transfer of ownership for "good cause."
According to the FDD, good cause includes, but is not limited to, the failure of the franchisee or proposed transferee to pay any sums owing to Cinnaholic. This means that if a franchisee in Michigan, or the person to whom they are trying to transfer the franchise, owes money to Cinnaholic at the time of the proposed transfer, Cinnaholic has grounds to block the transfer.
This provision protects Cinnaholic's financial interests by ensuring that outstanding debts are addressed before a franchise changes hands. For a prospective franchisee, this highlights the importance of maintaining good financial standing with Cinnaholic and ensuring that any potential buyer is also financially sound and willing to settle any outstanding debts to Cinnaholic as part of the transfer process.