Does Crown Gold Exchange have a right of first refusal to purchase the assets of a franchise in Michigan?
Crown_Gold_Exchange Franchise · 2024 FDDAnswer from 2024 FDD Document
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
- (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 transferee 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.
- (h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
Source: Item 23 — RECEIPTS (FDD pages 39–114)
What This Means (2024 FDD)
According to the 2024 Crown Gold Exchange Franchise Disclosure Document, Michigan law addresses the franchisor's right of first refusal. Specifically, Michigan prohibits certain unfair provisions that are sometimes included in franchise documents. If any of these provisions are present, they are considered void and unenforceable against the franchisee.
One such provision relates to the transfer of ownership. While a franchisor can prevent a transfer for good cause, Michigan law explicitly states that it does not prevent a franchisor from exercising a right of first refusal to purchase the assets of a franchise. This right of first refusal must be on the same terms and conditions as a legitimate third-party offer. Additionally, the franchisor can acquire the assets at market or appraised value if the franchisee breaches the franchise agreement and fails to correct the breach.
In summary, Crown Gold Exchange is permitted to have a right of first refusal to purchase a franchise's assets in Michigan under specific conditions. This right can be exercised if a franchisee proposes a transfer to a third party, allowing Crown Gold Exchange to match the third party's offer. Additionally, Crown Gold Exchange can acquire the assets if the franchisee breaches the agreement, providing a mechanism for the franchisor to regain control of the franchise under certain circumstances.