If a franchisor’s sales pitch doesn’t match the financial results you later experience, market conditions may not be the only explanation. Franchise sales misrepresentation can occur when false, misleading, or incomplete information influences the decision to buy.
Business owners throughout Michigan bring franchise disputes to August Law, PLLC. Misrepresentation or disclosure violations can support claims for damages or rescission in qualifying cases, but the available remedy depends on the facts, the legal theory, and the filing deadline.
Franchise Sales Misrepresentation Under Michigan Law
A franchise dispute can involve intentional fraud, negligent misrepresentation, or another disclosure-based claim. The exact elements depend on the claim asserted. Evidence may include sales presentations, emails, financial projections, call notes, and the Franchise Disclosure Document (FDD).
The key question is not simply whether a projection turned out to be wrong. A claim generally requires a legally actionable false statement, omission, or disclosure violation that affected the purchase decision.
Item 19 and Misleading Earnings Claims
Item 19 of the Franchise Disclosure Document (FDD) is where a franchisor can provide financial performance representations. Under the Federal Trade Commission’s Franchise Rule, those representations need a reasonable basis and written substantiation, and financial performance claims generally must appear in Item 19 unless a narrow exception applies.
Warning signs can include:
- Sales or profit figures shared outside the FDD that do not match Item 19
- Averages that omit closed or poorly performing locations
- Profit figures that exclude high operating costs such as rent or royalties
Save the FDD, spreadsheets, emails, text messages, and sales materials you received before signing. Those records can help show what was represented and when.
Damages and Rescission Under Michigan Franchise Law
The Michigan Franchise Investment Law provides civil remedies for certain violations. Under MCL 445.1531, qualifying claims can support damages or rescission, along with statutory interest, reasonable attorney fees, and court costs.
The statute also contains a detailed rescission-offer procedure. A qualifying written refund offer can affect the right to maintain a lawsuit if it is not accepted or rejected within the statutory time period. The wording, timing, and ownership status at the time of the offer matter, so review the actual notice before deciding how to respond.
Integration Clauses and Franchise Fraud Claims
Many franchise agreements include an integration clause stating that the written contract contains the full agreement. That language can affect a fraud or misrepresentation claim, but it does not automatically end every claim. The result depends on the agreement’s wording, the alleged misrepresentation, and the legal theory asserted.
Michigan Franchise Claims Have Short Filing Deadlines
Michigan’s Franchise Investment Law contains an outside four-year limitations period, but shorter periods can also apply. Under MCL 445.1533, a claim can be barred sooner based on when the buyer learned the facts or received written disclosure of the violation. Waiting can therefore eliminate a claim before four years have passed.
Talk With August Law About a Michigan Franchise Misrepresentation Claim
Bring your franchise agreement, FDD, sales materials, and the financial information you relied on to August Law. Our team can compare the pre-sale representations with the documents and applicable law to assess whether a claim is still available.
Call 248-833-6225 or contact us online to schedule a case evaluation with our Michigan franchise attorneys.