In Michigan, under what circumstances can Kidokinetics refuse to permit a transfer of ownership of a franchise?
Kidokinetics 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.
- (i) the failure of the proposed transferee to meet our then-current reasonable qualifications or standards.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Michigan law has specific stipulations regarding franchise transfer restrictions. Kidokinetics can only refuse a transfer of ownership for "good cause." This means Kidokinetics cannot arbitrarily deny a transfer; there must be a legitimate reason. However, this does not prevent Kidokinetics from exercising a right of first refusal to purchase the franchise themselves.
The FDD specifies several situations that constitute "good cause" for denying a transfer. These include if the proposed transferee does not meet Kidokinetics's then-current reasonable qualifications or standards, or if the proposed transferee is a competitor of Kidokinetics or its subfranchisor.
Additionally, Kidokinetics can refuse a transfer 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 any sums owing to Kidokinetics or cure any default in the Franchise Agreement at the time of the proposed transfer. These conditions provide clarity to potential franchisees regarding what could impede their ability to transfer their Kidokinetics franchise in the future.