In Michigan, what is considered 'good cause' for City Publications to refuse 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 impacts the franchisor's ability to deny a franchise transfer. Specifically, City Publications cannot prevent a transfer of ownership without 'good cause.'
The FDD outlines several conditions that constitute 'good cause' for denying a transfer in Michigan. These include if the proposed transferee fails to meet City Publications' then-current reasonable qualifications or standards. Another cause is if the proposed transferee is a competitor of City Publications. Additionally, 'good cause' exists 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 City Publications or has failed to correct any existing defaults in the Franchise Agreement at the time of the proposed transfer.
It is important to note that Michigan law does not prevent City Publications from exercising a right of first refusal to purchase the franchise. This means that even if a proposed transferee meets all the qualifications, City Publications can still choose to buy the franchise themselves, preempting the transfer to the third party. This clause aims to protect franchisees while also giving City Publications some control over who enters their franchise system.