In Michigan, what are some examples of 'good cause' for Southern Steer to refuse a transfer of franchise ownership?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) A provision which permits us to refuse to permit a transfer of ownership of a franchise, except for good cause.
This subdivision does not prevent us from exercising the right of first refusal to purchase the franchise.
Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet our then current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of us or our subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) Your or proposed transferee's failure to pay any sums owing to us or to cure any default in the Franchise Agreement or Multi Unit Development Agreement existing at the time of the proposed transfer.
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, Michigan law stipulates certain conditions under which Southern Steer can refuse a franchise transfer. These 'good cause' reasons include if the proposed transferee doesn't meet Southern Steer's current qualifications or standards, if the transferee is a competitor, or if the transferee is unwilling to comply with all lawful obligations in writing. Additionally, failure by the current franchisee or the proposed transferee to pay owed sums or resolve any defaults in the Franchise Agreement or Multi-Unit Development Agreement at the time of the proposed transfer also constitutes 'good cause'.
These stipulations protect Southern Steer's brand integrity and financial interests. By ensuring that any potential new franchisee meets their standards and isn't a competitor, Southern Steer aims to maintain consistent quality and prevent conflicts of interest. The requirement for written compliance with obligations ensures that the new franchisee is legally bound to the same terms as the original franchisee, safeguarding the network's operational consistency.
For a prospective franchisee, this means that any potential sale of their Southern Steer franchise is contingent on finding a buyer who meets Southern Steer's approval and is willing to adhere to the franchise agreement. It also highlights the importance of staying current on all payments and resolving any defaults to maintain the ability to transfer the franchise. Understanding these conditions is crucial for franchisees planning their exit strategy or considering selling their business in the future.
It is important to note that Michigan law also prevents Southern Steer from unreasonably withholding consent to a transfer. While Southern Steer has the right to protect its brand, it cannot use these provisions to unfairly prevent a franchisee from selling their business to a qualified buyer. Franchisees should consult with an attorney to fully understand their rights and obligations regarding franchise transfers under Michigan law.