In Michigan, can Endless Summer Sweets refuse to permit a transfer of ownership of a franchise for any reason?
Endless_Summer_Sweets 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:
- (a) A prohibition on the right of a franchisee to join an association of franchisees.
- (b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protection provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
- (c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
- (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, or 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.
- (e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
- (f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to the 2024 Endless Summer Sweets FDD, Michigan law prohibits certain unfair provisions that are sometimes included in franchise documents. Specifically, if the franchise documents contain a provision that requires a franchisee to agree to a release, assignment, novation, waiver, or estoppel that deprives them of rights and protections provided under Michigan's franchise regulations, that provision is void and unenforceable. This means Endless Summer Sweets cannot enforce such a provision against a franchisee in Michigan.
Additionally, a provision that allows Endless Summer Sweets to terminate a franchise before its term expires without good cause is void. Good cause is defined as the franchisee's failure to comply with a lawful provision of the franchise agreement, provided they are given written notice and a reasonable opportunity to correct the failure, which must be at least 30 days.
Furthermore, Endless Summer Sweets cannot include a provision that allows them to refuse to renew a franchise without fairly compensating the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings at the time of expiration. This only applies if the franchise term is less than 5 years and the franchisee is prohibited from continuing the same business under a different brand in the same area, or if the franchisee does not receive at least 6 months' advance notice of the non-renewal. Finally, any provision requiring arbitration or litigation to be conducted outside of Michigan is void, although the franchisee can agree to out-of-state arbitration at the time of arbitration.