What are some examples of 'good cause' for Extreme Art Studio to refuse a transfer of ownership in Michigan?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
- (g) A provision which permits us to refuse to permit a transfer of ownership of a Franchise, except for good cause.
This subdivision does not prevent us 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 our then-current reasonable qualifications or standards.
(ii) the fact that the proposed transferee is a competitor of us or our subfranchisor.
(iii) the unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) your or proposed transferee's failure to pay any sums owing to us or to cure any default in the Franchise Agreement existing at the time of the proposed transfer.
Source: Item 23 — RECEIPTS (FDD pages 49–214)
What This Means (2024 FDD)
According to the 2024 Extreme Art Studio Franchise Disclosure Document, Michigan franchisees have certain protections regarding the transfer of ownership. Extreme Art Studio cannot refuse a transfer of ownership of a franchise in Michigan without 'good cause.'
The FDD specifies several conditions that constitute 'good cause'. These include if the proposed transferee fails to meet Extreme Art Studio's current reasonable qualifications or standards. Another cause is if the proposed transferee is a competitor of Extreme Art Studio or its subfranchisor. Extreme Art Studio can also refuse a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations. Finally, failure of the current franchisee or the proposed transferee to pay any sums owing to Extreme Art Studio or to cure any default in the Franchise Agreement existing at the time of the proposed transfer also constitutes good cause.
It is important to note that this does not prevent Extreme Art Studio from exercising a right of first refusal to purchase the franchise. This means that even if a potential transferee meets all qualifications, Extreme Art Studio has the option to buy the franchise themselves under the same terms offered to the transferee.