Owning a franchise is a very popular way to generate income, but as with all business opportunities, there are unique legal issues a potential franchisee should consider. One of the most important aspects of any franchise relationship is the contract that governs the relationship—the franchise agreement. The franchise agreement will often outline important obligations, procedures and grounds for termination. While these contracts are often dozens of pages, a clear understanding of the terms is important because disputes, and even litigation, can arise when the franchisor or franchisee feels the other party has failed to perform. The courts will often look to the specific terms of the franchise agreement for guidance. A franchise relationship is often for a period of several years, so understanding when a party may terminate the relationship, what constitutes a breach of the agreement and how a franchisee may transfer his or her interest in the business is very important. The franchise agreement will often be the controlling authority on these issues.
Michigan, like most states, has a set of laws specifically addressing the franchise relationship. Any current or prospective franchisee should review these statutes. MCL 445.1508 outlines disclosures to which all potential franchisees are entitled. MCL 445.1527 identifies provisions that are void and unenforceable in franchise agreements or other documents. MCL 445.1533 explains that there is a 4-year time period for some claims related to franchise agreements. These are just a few of the provisions contained in Michigan’s franchise laws, but careful review of these statutes and the terms of the franchise agreement can help avoid confusion and litigation down the road. Due to the complexity of franchise agreements, it is often advisable to consult with a qualified attorney with experience handling franchise disputes prior to entering into a franchise agreement or when issues arise during the franchise relationship.