In Michigan, is Embassy Suites required to compensate a franchisee if they refuse to renew a franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 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.
- (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 not subject to compensation. This subsection applies only if (i) the term of the franchise is less than 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 of other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of Franchisor's intent not to renew the franchise.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Michigan law includes provisions regarding franchise renewals and compensation. Specifically, if Embassy Suites refuses to renew a franchise in Michigan, they may be required to fairly compensate the franchisee. This compensation would cover the fair market value of the franchisee's inventory, supplies, equipment, fixtures, and furnishings at the time of expiration. However, this requirement has some limitations.
Compensation is not required for personalized materials that have no value to Embassy Suites, or for items not reasonably required for the franchise business. Furthermore, the compensation requirement only applies if two conditions are met: (1) the franchise term is less than 5 years, and (2) the franchisee is either prohibited from continuing a similar business in the same area under a different brand after the franchise expires, or the franchisee does not receive at least 6 months' advance notice of Embassy Suites' intent not to renew the franchise.
In practical terms, this means that if an Embassy Suites franchise in Michigan has a term of less than 5 years, and the franchisee is restricted from operating a similar hotel nearby after the term, Embassy Suites must compensate them for the value of their assets if they choose not to renew, provided they don't give at least 6 months notice. This provision aims to protect franchisees from unfair non-renewal practices, ensuring they receive some value for their investment if they are effectively forced out of business after a short franchise term. Franchisees should carefully review their franchise agreement and any state-specific addenda to understand their rights and obligations regarding renewal and compensation.