In Michigan, what constitutes 'good cause' for Mr. Sandless to refuse a transfer of ownership of a franchise?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(i) Failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 30–34)
What This Means (2025 FDD)
According to the 2025 Mr. Sandless Franchise Disclosure Document, Michigan law prohibits Mr. Sandless from unreasonably withholding the transfer of a franchise. Specifically, Mr. Sandless can only refuse a transfer if there is 'good cause'.
The FDD specifies several conditions that constitute 'good cause'. These include situations where the proposed transferee does not meet Mr. Sandless's current qualifications or standards, if the transferee is a competitor of Mr. Sandless, or if the transferee is unwilling to comply with all lawful obligations in writing. Additionally, failure of the franchisee or proposed transferee to pay any outstanding amounts owed to Mr. Sandless or to resolve any existing default in the franchise agreement at the time of the proposed transfer also constitutes 'good cause'.
This provision protects franchisees by preventing Mr. Sandless from arbitrarily denying a transfer. However, it also allows Mr. Sandless to ensure that any new franchisee meets their standards and obligations, protecting the brand and the interests of other franchisees. It is important to note that this does not prevent Mr. Sandless from exercising a right of first refusal to purchase the franchise.