Consumer Protection

What if I have questions about franchises?

 

Disclaimer: The following should not be construed as legal advice, or a binding legal opinion from the Department of Attorney General.  The information provided is intended only as informal guidance regarding general issues related to franchise investments in the State of Michigan.  The Attorney General's Office cannot provide you with legal advice or interpretations of statutes.  Questions about your compliance with state and federal franchise laws, rules, and regulations should be directed to your attorney.   

 

1.  What is a franchise?

 

McDonalds, Burger King, and Dunkin Donuts are three popular franchise operations.  The Michigan Franchise Investment Law defines a "Franchise" as follows:

 

445.1502(3)  "Franchise" means a contract or agreement, either express or implied, whether oral or written, between 2 or more persons to which all of the following apply:

 

(a)  A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor.

(b)  A franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate.

(c)  The franchisee is required to pay, directly or indirectly, a franchise fee.

 

A franchisor is the person who sells the franchise while a franchisee is the person who buys and operates the franchise.

 

2.  How can I find out who owns a franchise?

 

Franchisees are not required to register with the Department of Attorney General, Franchise Section.  You may try contacting the county clerk's office or ask for city tax rolls to find out who pays taxes at that property.

 

Franchisors

 

1.  What do I have to do before selling franchises in the State of Michigan?

 

In general, franchisors must register with the Department of Attorney General, Franchise Section, prior to offering or selling franchises in the State of Michigan.  This registration is referred to as a "Notice of Intent."  The Notice of Intent should be typed on the franchisor's letterhead and the correct format to be used is as follows:

 

                  1.          Name of franchisor;

                  2.          Franchisor's business name; and

                  3.          Franchisor's principal business address.

 

It would be helpful if the franchisor also includes the type of business they will operate in the Notice of Intent.

 

A check in the amount of $250.00 payable to the State of Michigan must accompany the Notice.


2.  What information is required in Franchise Disclosure Documents in the State of Michigan? 


The Michigan Department of Attorney General, Franchise Section, does not review franchise disclosure documents (FDDs) for compliance with state or federal law.  Michigan is a "notice only" state, meaning the law only requires that franchisors register with the Attorney General once a year if they wish to offer or sell franchises in the State of Michigan.   

A copy of the Michigan Franchise Investment Law (MFIL) MCL 445.1501 et seq. can be found on the Michigan Legislature website at http://www.legislature.mi.gov.  The Michigan Administrative Code related to the Michigan Franchise Investment Law can be found on the Michigan Department of Licensing and Regulatory Affairs, Michigan Administrative Code website at http://www7.dleg.state.mi.us/orr/Files/AdminCode/107_82_AdminCode.pdfFranchisors should do their best to comply with both federal and state laws regarding disclosures.   The Federal Trade Commission (FTC) has published helpful guidance on how to comply with their amended FTC Franchise Rule.  The FTC's Franchise Rule Compliance Guide can be found online at http://business.ftc.gov/.

3.  What about the Michigan disclosure page?

Michigan does not review FDDs, and the Attorney General's Office cannot provide you with legal advice.  You should do your best to comply with state and federal law, and section 8, paragraph 3 discusses placement of the Michigan disclosure page.  Page 26 of the FTC's Franchise Rule Compliance Guide also discusses suggestions on how to comply with both state and federal disclosure requirements. 


4.  Do I have to re-register to sell franchises in the state of Michigan after July 1, 2008?

No.  Michigan law only requires registration once a year.  If you are already registered to sell franchises, that registration lasts for one year.  If you are not registered to sell franchises, and you wish to offer or sell franchises in the state of Michigan, you must register.


Franchisees


1.  How do I know if a franchisor is registered to sell franchises in the State of Michigan?

To check if a franchisor is currently registered to sell franchises in the State of Michigan, you may call (517) 373-7117 and provide the name of the franchisor. 

 


2.  How do I know if a franchise is a good investment?

The Attorney General's Office does not endorse any franchisor, and we cannot provide you with legal, business, or financial advice.  If you would like to check on a franchisor's complaint history (that is, the number of complaints on file with the Consumer Protection Division, Franchise Section), you may call (517) 373-7117 and ask if there are any complaints on file about a particular franchisor. 

For some additional tips on how to shop for a franchise, you may wish to refer to the Michigan Guide for Prospective Franchisees, available at http://www.michigan.gov/documents/mifran_guide_40368_7.pdf, or the FTC website, at http://business.ftc.gov/documents/inv05-buying-franchise-consumer-guide.