In Michigan, under what conditions can Cinnaholic refuse to permit a transfer of ownership of a franchise?
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 franchise transfer. Specifically, Cinnaholic can only refuse a transfer for "good cause." This does not prevent Cinnaholic from exercising a right of first refusal to purchase the franchise.
The FDD defines "good cause" as including, but not limited to, several scenarios. These include if the proposed franchisee does not meet Cinnaholic's current reasonable qualifications or standards, or if the proposed transferee is a competitor of Cinnaholic. Further, refusal is permitted 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 cure any default in the franchise agreement at the time of the proposed transfer.
This means that a Cinnaholic franchisee in Michigan looking to transfer ownership needs to ensure the potential buyer meets Cinnaholic's standards, is not a competitor, agrees to comply with all obligations, and that all outstanding payments and defaults are resolved. Otherwise, Cinnaholic has grounds to refuse the transfer. This provision aims to protect the integrity and standards of the Cinnaholic brand while providing clear conditions for franchise transfer.