Franchising in Maryland
Maryland Franchise Law
Is Maryland a Franchise Registration State?
Yes, Maryland is a franchise registration state. Franchisors must file an application and obtain registration prior to offering or selling any franchises in the State of Maryland. The registration process requires submission of an application packet and review of the franchise disclosure document. Maryland often provides comments and requires revisions; however, approval is not an endorsement of the franchise offering itself. Approval simply means that the franchisor can offer franchises in the state of Maryland.
State Franchise Laws
Maryland has also enacted certain franchise specific laws that may effect the rights of franchisees. These laws supersede the terms of the franchise agreement and are typically addressed through an addendum to the franchise agreement and disclosure document. For instance, these laws effect restrictions on renewal, dispute resolution proceedings, and the time to bring a claim. Maryland regulators may also impose certain fee restrictions on franchisors.
These Maryland specific laws are in addition to federal franchise laws.
maryland franchise registration application materials
The Application
Franchisors must complete a Uniform Franchise Registration Application (known as Form A).
The FDD
Franchisors must submit a FDD prepared in compliance with federal franchise law. The FDD must also contain a Maryland addendum modifying certain provisions to comply with MD franchise laws.
Financials
The FDD must comply with federal and state requirements for audited financials. If the audit was conducted outside of 120 days of the application, it. must also be accompanied by certain unaudited financials. The auditors consent to use the financials in the FDD must be provided in writing.
Consent to Service
Franchisors must consent to service of process in the State of Maryland. This is done through a Uniform Franchise Consent to Service of Process form (known as Form C).
Franchise Seller Disclosures
Franchisors submit certain information on the individuals that are not listed in Item 2, but will act as a franchise seller in Maryland (typically, the sales team). This is provide on a Franchise Seller Disclosure Form (known as Form D).
Costs and Source of Funds
Franchisors submit a form explaining how they pay for the training that they will provide to new franchisees. This is done through completion of the Franchisor’s Costs and Sources of Funds form (known as Form B).
Filing Fee
Franchisors must pay the filing fee to begin offering franchises, along with a renewal fee with annual renewal applications. The initial filing fee is currently $500 and the annual renewal filing fee is currently $250.
Affidavit of Compliance
Prior to granting registration, Maryland may require the franchisor to complete an affidavit of compliance to confirm they did not offer or sale any franchises before being granted approval to do so,.
How long does it take for approval to offer franchise Opportunties in Maryland?
It depends. The registration process can vary from a few weeks to a few months. The length of time may depend on numerous factors, including changes required by state regulators. We file initial and renewal franchise applications in Maryland through the NASAA EFD.
how do i find out if a franchisor is registered in Maryland?
Maryland does not maintain its own online database for disclosure documents to be directly accessible to the public; however, they do participate in the electronic filing depository (“NASAA EFD”). If a franchisor has filed through NASAA EFD, you can search for their disclosure document through the NASAA EFD search function on their website. Alternatively, you can contact the Maryland Securities Division at (410) 576-7786.
What Federal Laws Effect Franchises?
Franchise opportunities are regulated on the federal level through the federal Franchise Rule. The rules imposed by federal law apply to all states and provinces in the United States. We provide an overview of federal franchise law. There are a few basic things that anyone considering a franchise, or considering becoming a franchisor, must know.
The offer of a franchise opportunity can only occur through disclosure of a franchise disclosure document (the “FDD”). The requirements for disclosure documents are laid out in the federal franchise rule and cover 23 separate items. The FDD must be provided and receipt must be acknowledge.
The franchise rules require a 14-day waiting period between the prospect receiving the FDD and signing any agreement or exchanging any funds. The rule requires these periods to ensure prospects have sufficient time to evaluate any franchise opportunity.
In addition to the 14-day waiting period, franchisors are required to observe a 7-day waiting period if there are certain changes made to teh franchise agreement. In practice, many franchisors observe this period after producing the final agreement.
How do Franchise Attorneys Help Franchisors and Franchisees?
Franchisor Support
Our franchise attorneys support franchisors nationwide providing reliable and readily accessible legal guidance. We represent franchisors and provide ongoing legal support. We works with small business owners planning to franchise and work with leaders in franchising. Big or small, every client matters and will get the priority and attention they deserve. Prompt and reliable legal advice – on demand.
Franchisor legal services include:
- Developing and implementing a plan to franchise
- Drafting the franchise disclosure document (the “FDD”)
- Drafting the franchise agreement and all franchise contracts
- Securing franchise registration in Virginia and across the U.S.
- Disclosing prospects and sending franchise agreements
- Managing and resolving franchise disputes
- Providing day-to-day franchise legal support
How much does a franchisor lawyer cost?
Once we know a little about your business, we will provide a flat fee to develop the FDD. We often serve existing franchisors on a monthly basis for a fixed monthly rate.
Franchisee Support
Our franchise attorneys understand what matters to franchisors because we work with leading franchisors, franchise sellers, and franchise consultants on a daily basis. We leverage this industry knowledge and experience to help clients who are considering the purchase of a franchise opportunity before they sign a franchise agreement.
Franchisee legal services include:
- Nationwide and Virginia FDD review
- Nationwide and Virginia franchise agreement review
- Comprehensive franchise legal review report
- Consultation and legal advice on rights and obligations
- Consultation and negotiation on business legal terms
- Direct dispute resolution and litigation
- Day-to-day legal support
How much does a franchise lawyer cost?
We provide a comprehensive FDD review and unlimited consultation for a competitive flat fee ($1,850). We can assist on other projects at an agreed fixed cost or our hourly rate.
