In Michigan, what constitutes 'good cause' for Kidokinetics to refuse a transfer of ownership?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
l payments by franchisees that purchase multiple franchises shall be deferred until the first franchise opens.
FRANCHISOR: KIDOKINETICS FRANCHISE LLC Entity name (if any) _ Date:
MICHIGAN
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 your right to join an association of franchisees.
- (b) A requirement that you assent to a release, assignment, novation, waiver, or estoppel which deprives you of rights and protections provided in this act. This shall not preclude you, after entering into a Franchise Agreement, from settling any and all claims.
- (c) A provision that permits us to terminate a Franchise prior to the expiration of its term except for good cause.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Michigan law addresses the conditions under which Kidokinetics can refuse a transfer of ownership. Specifically, the FDD states that franchise documents cannot contain provisions that permit Kidokinetics to refuse a transfer of ownership of a franchise, "except for good cause."
The FDD defines 'good cause' as including, but not limited to, several specific scenarios. These include the proposed transferee's failure to meet Kidokinetics's then-current reasonable qualifications or standards, or if the proposed transferee is a competitor of Kidokinetics or its subfranchisor. Additionally, good cause exists if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations, or if either the current franchisee or the proposed transferee has failed to pay sums owing to Kidokinetics or cure any default in the Franchise Agreement at the time of the proposed transfer.
It is important to note that Michigan law does not prevent Kidokinetics from exercising a right of first refusal to purchase the franchise. This means that even if none of the 'good cause' conditions are met, Kidokinetics retains the option to buy the franchise itself before allowing a transfer to a third party. This provision aims to balance the franchisee's right to transfer their business with Kidokinetics's interest in maintaining brand standards and controlling who operates under its name.