In Michigan, under what conditions can Southern Steer refuse to permit a transfer of ownership of a franchise?
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 Southern Steer's 2025 Franchise Disclosure Document, specifically regarding Michigan franchise law, Southern Steer can refuse a transfer of ownership for "good cause." This is a standard provision under Michigan franchise law, protecting the integrity of the franchise system.
The definition of "good cause" includes several specific scenarios. Southern Steer can refuse a transfer if the proposed transferee does not meet the brand's then-current reasonable qualifications or standards. This ensures that new franchisees are capable of maintaining Southern Steer's operational and quality standards. A transfer can also be denied if the proposed transferee is a competitor of Southern Steer or its subfranchisor, preventing potential conflicts of interest and protecting proprietary information.
Furthermore, Southern Steer can block a transfer if the proposed transferee is unwilling to agree in writing to comply with all lawful obligations under the franchise agreement. This ensures that the new franchisee is committed to upholding the terms of the agreement. Finally, a transfer can be refused if the current franchisee or the proposed transferee has failed to pay any sums owing to Southern Steer or has failed to cure any default in the Franchise Agreement or Multi Unit Development Agreement at the time of the proposed transfer. This protects Southern Steer's financial interests and ensures compliance with existing agreements. It is important to note that Southern Steer retains the right of first refusal to purchase the franchise.