In Michigan, under what conditions can Embassy Suites refuse a transfer of ownership of a franchise?
Embassy_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
MICHIGAN ADDENDUM TO DISCLOSURE 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.
- (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.
Source: Item 23 — RECEIPTS (FDD pages 97–305)
What This Means (2025 FDD)
According to the 2025 Embassy Suites Franchise Disclosure Document, Michigan law stipulates specific conditions under which Embassy Suites can refuse a transfer of franchise ownership. Embassy Suites can only refuse a transfer for "good cause." This does not prevent Embassy Suites from exercising a right of first refusal to purchase the franchise.
Good cause, as defined within the Michigan addendum, includes several scenarios. Embassy Suites may refuse a transfer if the proposed transferee does not meet the brand's current reasonable qualifications or standards. Another reason for refusal is if the proposed transferee is a competitor of Embassy Suites. Additionally, Embassy Suites can refuse the transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations. Finally, failure of the franchisee or proposed transferee to pay any sums owing to Embassy Suites or to resolve any existing default in the Franchise Agreement at the time of the proposed transfer also constitutes good cause for refusal.
This Michigan addendum aims to protect franchisees by preventing arbitrary denials of transfer requests. It ensures that any refusal by Embassy Suites is based on legitimate, justifiable reasons related to the transferee's qualifications, adherence to the franchise agreement, or financial standing. Prospective franchisees in Michigan should carefully review these conditions to understand their rights and obligations regarding franchise transfers.