Does Pearce Bespoke have a right of first refusal to purchase the assets of a franchise in Michigan?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 22: CONTRACTS]
ADDENDUM TO THE PEARCE BESPOKE FRANCHISING LLC DISCLOSURE DOCUMENT AND FRANCHISE AGREEMENT REQUIRED BY THE STATE OF MICHIGAN
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:
(a) A prohibition on the right of a franchisee to join an association of franchises.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver or estoppel which deprives a franchisee of rights and protections provided in this act.
This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
- (c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause.
Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than thirty (30) days, to cure such failure.
- (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.
- (e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
Based on the 2025 Pearce Bespoke Franchise Disclosure Document, there is an addendum that applies specifically to franchisees in Michigan. This addendum addresses certain provisions that the State of Michigan prohibits as unfair in franchise agreements. These provisions, if present in the Pearce Bespoke franchise documents, are void and unenforceable against the franchisee.
The prohibited provisions include restrictions on a franchisee's right to join a franchise association, requirements for franchisees to waive rights and protections under the Michigan Franchise Act, and the ability of Pearce Bespoke to terminate or refuse to renew a franchise without good cause or fair compensation. Good cause for termination includes the franchisee's failure to comply with the franchise agreement, provided they are given written notice and a reasonable opportunity (up to 30 days) to correct the failure.
The addendum also addresses the franchisor's ability to refuse renewal without compensating the franchisee for the fair market value of inventory, supplies, equipment, fixtures, and furnishings, under specific conditions. These conditions are (i) the franchise term is less than five years, and (ii) the franchisee is prohibited from continuing a similar business in the same area after the franchise expires, or does not receive at least six months' notice of non-renewal. However, the FDD does not explicitly state whether Pearce Bespoke has a right of first refusal to purchase the assets of a franchise in Michigan. A prospective franchisee should clarify this point with Pearce Bespoke prior to signing the Franchise Agreement.