In Michigan, under what circumstances is Kidokinetics required to compensate a franchisee for inventory, supplies, equipment, fixtures and furnishings upon non-renewal?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
- (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; and (ii) you are prohibited by the Franchise Agreement or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the Franchise or you do not receive at least six months' advance notice of our intent not to renew the Franchise.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Michigan law includes provisions that protect franchisees regarding non-renewal of their franchise agreement. Specifically, a provision that allows Kidokinetics to refuse renewal without fairly compensating the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings is void and unenforceable under certain conditions. This protection ensures that franchisees are not left with unsalable assets when the franchise agreement ends.
However, this compensation requirement does not apply to personalized materials that have no value to Kidokinetics, or to inventory, supplies, equipment, fixtures, and furnishings not reasonably required for conducting the Kidokinetics business. This means that only standard, usable items are subject to compensation.
For this protection to apply, two conditions must be met: (1) the term of the franchise must be less than five years, and (2) the franchisee must either be prohibited from continuing a similar business in the same area under a different brand after the franchise expires, or the franchisee must not receive at least six months' advance notice of Kidokinetics's intent not to renew the franchise. These conditions ensure that the compensation requirement is targeted towards franchisees who have a shorter franchise term and limited ability to continue in a similar business after the agreement ends, or who do not receive adequate notice of non-renewal.