Under what circumstances does the compensation requirement apply when Pearce Bespoke refuses to renew a franchise?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
| FRANCHISOR: |
|---|
| Pearce Bespoke Franchising, LLC |
| By: |
| Nathan Pearce |
| , Chief Executive Officer |
| (Print Name, Title) |
| FRANCHISEE: |
| By: |
| , |
| (Print Name, Title) |
| PRINCIPAL: |
| (Print Name) |
| PRINCIPAL: |
| (Print Name) |
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 fr
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the compensation requirement for non-renewal applies specifically in Michigan under certain conditions. If Pearce Bespoke refuses to renew a franchise in Michigan, they must fairly compensate the franchisee for the fair market value of their inventory, supplies, equipment, fixtures, and furnishings. However, this excludes personalized materials that have no value to Pearce Bespoke, as well as inventory, supplies, equipment, fixtures, and furnishings not reasonably required for the franchise business.
This compensation requirement is further limited to situations where (i) the franchise term is less than five years, and (ii) the franchisee is either prohibited from continuing a similar business in the same area under a different brand after the franchise expires, or the franchisee does not receive at least six months' advance notice of Pearce Bespoke's intent not to renew the franchise. This provision aims to protect franchisees in Michigan who have invested in their business and face potential losses due to non-renewal, ensuring they receive fair compensation for their assets under specific circumstances.
For prospective Pearce Bespoke franchisees in Michigan, it's crucial to understand these conditions regarding non-renewal and compensation. If the franchise term is short (less than five years) and there are restrictions on operating a similar business post-expiration or insufficient notice of non-renewal, the franchisee is entitled to compensation for certain assets. This offers a degree of financial protection. Franchisees should carefully review their Franchise Agreement and related documents, paying close attention to the term length, renewal conditions, and any clauses regarding non-compete or notice periods to fully understand their rights and potential compensation in case of non-renewal.