In Michigan, does the Michigan Franchise Act require Kidokinetics to offer a renewal provision?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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 the State of Michigan. This shall not preclude you from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
- (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.
- (i) the failure of the proposed transferee to meet our then-current reasonable qualifications or standards.
- (h) A provision that requires you to resell to us items that are not uniquely identified with us. This subdivision does not prohibit a provision that grants to us a right of first refusal to purchase the assets of a Franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants us the right to acquire the assets of a Franchise for the market or appraised value of such assets if you have breached the lawful provisions of the Franchise Agreement and have failed to cure the breach in the manner provided in subdivision (c).
- (i) A provision which permits us to directly or indirectly convey, assign, or otherwise transfer our obligations to fulfill contractual obligations to you unless provision has been made for providing the required contractual services.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, the Michigan Franchise Act does not require Kidokinetics to offer a renewal provision. However, the Act does address the conditions under which Kidokinetics can refuse to renew a franchise. Specifically, Kidokinetics cannot 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 protection applies only if the franchise term is less than five years and the franchisee is either prohibited from continuing a similar business in the same area after the franchise expires, or does not receive at least six months' advance notice of Kidokinetics's intent not to renew.
Furthermore, Kidokinetics cannot refuse to renew a franchise on terms that are generally available to other franchisees of the same class or type under similar circumstances. It's important to note that the Michigan Franchise Act aims to protect franchisees from unfair practices related to non-renewal, but it does not mandate that Kidokinetics must offer a renewal option in the first place.
For a prospective Kidokinetics franchisee in Michigan, this means that while the franchise agreement itself may or may not include a renewal option, the state law provides some safeguards if Kidokinetics chooses not to renew. These safeguards include fair compensation for assets under specific conditions and equal treatment compared to other franchisees. A potential franchisee should carefully review the initial franchise agreement to understand the renewal terms, and also be aware of these protections afforded by Michigan law in case renewal is denied.