In Michigan, under what circumstances does the compensation requirement upon non-renewal NOT apply to Embassy Suites?
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 the 2025 Embassy Suites Franchise Disclosure Document, Michigan law includes specific stipulations regarding franchise agreements, including non-renewal compensation. The compensation requirement does not apply if both of the following conditions are met: (i) the term of the franchise is 5 years or longer, OR (ii) the franchisee is not prohibited from continuing a similar business in the same area under a different brand after the franchise expires, OR the franchisee receives at least 6 months advance notice of Embassy Suites' intent not to renew the franchise.
In simpler terms, Embassy Suites is not obligated to compensate a franchisee upon non-renewal in Michigan if the franchise term was 5 years or longer. Also, if the franchisee is free to open a competing hotel under a different brand in the same area after the agreement ends, Embassy Suites doesn't have to provide compensation. Finally, if Embassy Suites gives the franchisee at least six months' notice that the franchise will not be renewed, no compensation is required.
This provision protects Embassy Suites from having to buy back inventory, supplies, equipment, fixtures, and furnishings if the franchisee had a reasonable term length or has ample notice and opportunity to continue in business. However, personalized materials that have no value to Embassy Suites and items not reasonably required for the franchise business are not subject to compensation, regardless of these conditions.
For a prospective Embassy Suites franchisee in Michigan, it's crucial to understand these conditions regarding non-renewal. Franchisees should carefully consider the initial term of the agreement and the implications for their ability to continue in the same business after the franchise term, as these factors directly affect their rights to compensation upon non-renewal.