Under what circumstances is Crave required to compensate a franchisee in Michigan for inventory, supplies, equipment, fixtures, and furnishings if the franchise is not renewed?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures and furnishings.
Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures and furnishings not reasonably required in the conduct of the franchise business are notsubject to compensation.
Thissubsection applies only if: (i) the term of the franchise is less than five (5) years, and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least six (6) months' advance notice of franchisor's intent not to renew the franchise.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, Michigan law includes provisions regarding franchise non-renewal and franchisee compensation. Specifically, Crave cannot refuse to renew a franchise in Michigan without fairly compensating the franchisee. This compensation must be for the fair market value of the franchisee's inventory, supplies, equipment, fixtures, and furnishings at the time of expiration.
However, there are exceptions to this compensation requirement. Crave is not obligated to compensate for personalized materials that have no value to them. Additionally, they do not have to compensate for inventory, supplies, equipment, fixtures, and furnishings that are not reasonably required for conducting the franchise business.
Furthermore, these compensation rules only apply under specific conditions: (1) if the franchise term is less than five years, and (2) if the franchisee is prohibited from continuing a similar business in the same area under a different brand after the franchise expires, or if the franchisee does not receive at least six months' advance notice that Crave will not renew the franchise. Therefore, a prospective Crave franchisee in Michigan should carefully consider the initial franchise term, potential post-term business restrictions, and the amount of notice provided regarding non-renewal, as these factors will determine their rights to compensation for assets if the franchise is not renewed.