In Michigan, does Kidokinetics have a right of first refusal to purchase the assets of a franchise?
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. Good cause shall include your failure 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 us to refuse to renew your Franchise without fairly compensating you by repurchase or other means for the fair market value at the time of expiration of your inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to us 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 five years;
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 franchisor's right of first refusal regarding the purchase of a franchise's assets. Specifically, Michigan prohibits certain unfair provisions that might appear in franchise documents, and these provisions are considered void and unenforceable if they conflict with Michigan law.
One such provision relates to Kidokinetics's ability to refuse a transfer of ownership, but this does not prevent Kidokinetics from exercising a right of first refusal to purchase the franchise. Good cause for refusing a transfer includes the proposed transferee's failure to meet Kidokinetics's standards, being a competitor, unwillingness to comply with obligations, or failure to pay sums owed.
Furthermore, Michigan law addresses Kidokinetics's right to repurchase items from a franchisee. A provision requiring a franchisee to resell items not uniquely identified with Kidokinetics is restricted. However, this does not prohibit Kidokinetics from having a right of first refusal to purchase the assets of a franchise on the same terms as a third party or from acquiring the assets at market or appraised value if the franchisee has breached the Franchise Agreement and failed to cure the breach.