Section 445.305. Surety bond in lieu of escrow.

(1) In lieu of the imposition of an escrow, a franchisor at his option may post a surety bond of a surety company in the amount required by the administrator as protection of the franchisees   requires.

(2)  The surety company must  be  authorized  to   transact   business   in Michigan.

(3)   The administrator shall take into consideration the amount of  the franchise fees and other fees to be charged as well as the number of franchises to be offered, granted, or sold in   determining  the  initial amount of the surety bond and shall amend the amount   as   public   interest requires, using the same factors.

(4)   Should the franchisor fail to complete the obligations under the franchise contract to  provide  real  estate,  improvements,   equipment, inventory, training, or other items included in the offering, the surety company may pay the appropriate money to the administrator or  his designee, as obligee, for the benefit of all franchises  in  accordance with their contribution of franchise and other fees or amounts.

(5)   If the surety bond expires or is canceled and the franchisor is still under an obligation to provide real estate, improvements, equipment, inventory, training, or other items, the franchisor at his option may either post another surety bond or have an escrow of franchise and other fees imposed by the administrator. Until another surety bond acceptable to the administrator is purchased or escrow is imposed, the franchisor shall not make any new sales.

(6)     The state may be a party to the surety bond and shall, through the administrator, review its form and content.

History: 1979 AC.