Can Pearce Bespoke refuse a franchise transfer in Michigan if the franchisee owes money?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
C. Conditions to Other Transfer or Assignment.
Pearce Bespoke Franchisee (and its partners and shareholders, if any) will not transfer (whether voluntary or involuntary), assign or otherwise dispose of, in one or more transactions, Franchisee's business, all or substantially all of the assets of Franchisee's business, this Agreement or any controlling interest in Franchisee (a "controlling" interest will include a proposed transfer of fifty percent (50%) or more of the Capital Stock of a corporate Franchisee) without Franchisor's prior written consent, except to trusts established for Franchisee's benefit. Franchisor will not unreasonably withhold its consent to a transfer, subject to any or all of the following conditions described below which Franchisor may deem necessary:
All of Franchisee's accrued monetary obligations to Franchisor and suppliers will have been satisfied, and Franchisee is not in default under this Agreement;
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, a franchisee in Michigan may face restrictions on transferring their franchise if they have outstanding financial obligations. Specifically, Pearce Bespoke can withhold consent to a transfer if "all of Franchisee's accrued monetary obligations to Franchisor and suppliers will have been satisfied, and Franchisee is not in default under this Agreement".
This condition means that if a Pearce Bespoke franchisee in Michigan has any unpaid debts to the company or its suppliers, the transfer of the franchise can be blocked. This provision protects Pearce Bespoke's financial interests and ensures that any outstanding debts are settled before a new franchisee takes over. It also aligns with standard franchising practices, where franchisors typically require franchisees to be in good financial standing before allowing a transfer.
However, Michigan law also stipulates certain protections for franchisees. The FDD includes an addendum stating that certain unfair provisions are prohibited and void. These include any requirement that deprives a franchisee of rights and protections under the Michigan Franchise Act. While the FDD does not explicitly state that Pearce Bespoke cannot refuse a transfer if money is owed, the Michigan addendum suggests that any refusal must be fair and consistent with the franchisee's rights under state law. A prospective franchisee should consult with a legal expert to fully understand their rights under Michigan law.
Therefore, while Pearce Bespoke has the right to ensure financial obligations are met, Michigan franchisees have some protection against overly restrictive transfer conditions. Franchisees should carefully review the franchise agreement and any state-specific addenda to understand their rights and obligations regarding franchise transfers.