In Michigan, what are the conditions under which City Publications can refuse to permit a transfer of ownership of a franchise?
City_Publications Franchise · 2025 FDDAnswer from 2025 FDD Document
- ◼ A provision which permits a Franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
The 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:
◼ The failure of the proposed transferee to meet the Franchisor's then-current reasonable qualifications or standards.
◼ The fact that the proposed transferee is a competitor of the Franchisor or Subfranchisor.
◼ The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
◼ 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 — RECEIPT (FDD pages 39–129)
What This Means (2025 FDD)
According to City Publications' 2025 Franchise Disclosure Document, Michigan law addresses the conditions under which City Publications can refuse a franchise transfer. The state prohibits franchise agreements from preventing a transfer of ownership except for "good cause." However, City Publications retains the right of first refusal to purchase the franchise.
Good cause for denying a transfer includes several specific conditions. City Publications can refuse a transfer if the proposed transferee does not meet the franchisor's current reasonable qualifications or standards. A transfer can also be denied if the proposed transferee is a competitor of City Publications or its subfranchisor. Additionally, City Publications can block a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations outlined in the franchise agreement.
Furthermore, City Publications can refuse a transfer if the franchisee or the proposed transferee has not paid all sums owed to City Publications or has failed to correct any existing default in the franchise agreement at the time of the proposed transfer. These stipulations ensure that City Publications maintains control over who enters their franchise system and that financial and contractual obligations are met before a transfer is approved. Prospective franchisees in Michigan should carefully consider these conditions and ensure any potential buyers are fully vetted and financially sound to avoid transfer issues.