In Michigan, what specific items is Embassy Suites NOT required to compensate a franchisee for upon non-renewal?
Embassy_Suites 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 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 Embassy Suites's 2025 Franchise Disclosure Document, the Michigan Addendum specifies circumstances regarding franchise non-renewal and compensation. Embassy Suites is not required to compensate a franchisee in Michigan for personalized materials that have no value to the franchisor. Additionally, compensation is not required for inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business.
This provision regarding non-compensation applies specifically if two conditions are met. First, the term of the franchise must be less than 5 years. Second, the franchisee must either be prohibited from continuing a similar business in the same area under a different trademark after the franchise expires, or the franchisee does not receive at least 6 months' advance notice of Embassy Suites's intent not to renew the franchise.
This stipulation protects Embassy Suites from having to buy back items that are specific to the franchisee or not essential for running the business. It also provides clarity on the conditions under which these compensation rules apply, particularly concerning the length of the franchise term and the notice period for non-renewal. Prospective franchisees in Michigan should carefully consider these conditions and their implications for the potential value of their investment upon non-renewal.