Michigan

Registration or Filing Required? Yes, Registration
Business Opportunity Laws? Yes

Michigan is considered a franchise registration state. However, unlike other registration states, Michigan is a “notice” state and does not review a franchisor’s disclosure documents. Michigan charges a $250 fee for registration, which must be done annually. More information can be found on the Michigan Department of the Attorney General’s Website.

What Qualifies as a Franchise in Michigan?

Michigan’s Franchise Investment Law defines a franchise as a contract or agreement (express or implied, oral or written) between 2 or more persons in which:

1. A franchisee is granted the right to sell or distribute goods or services under a marketing plan or system prescribed in substantial part by a franchisor;
2. A franchisee is granted the right to sell or distribute goods or services associated with the franchisor’s trademark, service mark, trade name, logotype, advertising, or other commercial symbol; and
3. The franchisee is required to pay a franchise fee.

This definition is inherently broad, and businesses that license proprietary elements to other companies may not realize they meet the definition of a franchisor. Therefore, it is important to consult an experienced franchise attorney (don’t worry, we know plenty) if you believe your business may qualify as a franchise under Michigan law.

What Franchises Must Register in Michigan?

Franchisors are required to register in Michigan when the franchise offer is made in, directed to, or accepted in the state. Additionally, franchisors must register if both the franchisee is a resident of the state and the franchised business will be operated in the state.

How Do I Register in Michigan?

Easy! Michigan’s Franchise Investment Law also governs the registration of franchises in the state, and requires a lot less of franchisors than other registration states. In order to register your franchise in Michigan, you must submit an annual Notice of Intent, along with a check for $250 made payable to the State of Michigan. These documents are submitted to the Michigan Department of the Attorney General. The Notice of Intent must be typed on the franchisor’s letterhead and contain the following information:

• The name of the franchisor
• The franchisor’s business name (DBA)
• The franchisor’s principal business address
• A brief description of the franchisor’s business (not required, but highly recommended)

Michigan does not have a “renewal” filing process, so franchisors must complete this notice filing annually. Your franchise will be registered when you receive confirmation of your filing from the Department of the Attorney General.

Wow, That Was Easy. Are There Any Other Franchise Rules in Michigan?

We’re glad you found the registration process to be a breeze! Michigan’s Franchise Investment Law does provide additional regulations governing the franchise relationship, and we’ll highlight them for you here. First, Michigan requires a slightly different disclosure timeline than that of the federal franchise rule. Instead of requiring franchisors to furnish their FDDs to franchisees 14 days before the sale of the franchise, Michigan requires the FDDs to be furnished 10 business days before the execution of a franchise agreement or payment of franchise fees. Additionally, franchisors that have unaudited financial statements and a net worth of less than $100,000 must escrow initial fees or post a surety bond upon request of a franchisee. The law also imposes the following restrictions on the franchise agreement:

1. Prohibits restricting a franchisee’s ability to join an association of franchisees
2. Prohibits requiring franchisees to consent to a release or waiver of claims
3. Requires franchisors to have good cause to terminate the franchise agreement, and allow the franchisee 30 days to cure
4. Requires franchisor to fairly compensate franchisee for the fair market value of the franchisee’s inventory, supplies, equipment, fixtures and furnishings, if the franchisor refuses to renew the franchise agreement (only applies if the term is less than 5 years and non-compete provisions are enforced)
5. Prohibits franchisor from including terms that allow it to renew the agreement on substantially different terms than those presented to other franchisees
6. Prohibits requiring arbitration or litigation to be done outside of Michigan
7. Requires franchisors to have good cause to stop franchisee from transferring its interest in the franchise agreement
8. Prohibits provisions that require the franchisee to resell goods to the franchisor that are not uniquely identified with the franchisor
9. Prohibits provisions that allow the franchisor to directly or indirectly assign its obligations to fulfill contractual obligations (unless provision is necessary for providing required services)

Franchisors who violate these provisions open themselves up to claims and liability on behalf of franchisees and can face civil and criminal punishments.

Does Michigan Also Have Business Opportunity Laws?

Yes, Michigan also has business opportunity laws that govern the sale of business opportunities. Franchises are specifically excluded from the business opportunity laws. Nevertheless, it is worth being aware of these laws in case your business does not meet the definition of a franchise.

Michigan defines a business opportunity as a sale of goods or services exceeding $1 in which the goods or services enable the buyer to start a business, and the seller represents it will do one of the following:

1. Provide locations or assist buyer in finding locations for vending machines, racks, display cases, amusement machines or devices;
2. Potentially buy products made by the buyer using items sold by seller;
3. Guarantee buyer will derive income exceeding purchase price, or refund some/all money or buy back some/all products if buyer is not satisfied; or
4. Provide a sales or marketing plan to enable buyer to derive income exceeding the purchase price.

Business opportunities are not required to register in Michigan, but they must adhere to the restrictions posed in the Michigan Consumer Protection Act.

Fun Fact: Mackinac Island isn’t all that small (it’s covers some 4.4 square miles), but don’t plan on driving around while you’re there because cars are prohibited on the island! Instead, you should plan on traveling by foot, bike or horse-drawn carriage.