Does the Michigan addendum require Pearce Bespoke to offer a renewal provision?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
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:
- (d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures and furnishings.
Personalized materials which have no value to the franchisor 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 (5) years, and (ii) the franchisee is prohibited by the franchise 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 the franchisee does not receive at least six (6) months' advance notice of franchisor's intent not to renew the franchise.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 Pearce Bespoke Franchise Disclosure Document, the Michigan addendum addresses franchise renewal but does not explicitly mandate that Pearce Bespoke offer a renewal provision. Instead, it focuses on protecting franchisees in specific scenarios where renewal is denied.
Specifically, the addendum states that any provision allowing Pearce Bespoke to refuse renewal without fairly compensating the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings is void under certain conditions. These conditions are: (i) if the franchise term is less than five years, and (ii) if the franchisee is prevented from operating a similar business in the same area after the franchise expires, or if the franchisee does not receive at least six months' advance notice of non-renewal.
This implies that while Pearce Bespoke isn't forced to offer renewal, if they choose not to renew under the specified short-term and restrictive conditions, they must compensate the franchisee for the value of certain assets. This provision aims to protect franchisees from unfair financial losses when a short-term franchise is not renewed and the franchisee is restricted from continuing a similar business.