More information on Maryland franchise laws can be found here: Maryland Franchise Registration Laws
Maryland
Franchise Registration
Maryland
Maryland is a franchise registration and business opportunity law state.
Maryland Franchise Laws
Maryland law defines a “franchise” as an expressed or implied, oral or written agreement in which:
- A purchaser 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 the franchisor;
- The operation of the business under the marketing plan or system is associated substantially with the trademark, service mark, trade name, logotype, advertising, or other commercial symbol that designates the franchisor or its affiliate; and
- The purchaser must pay, directly or indirectly, a franchise fee.
Md. Business Regulation Code Ann. § 14-20).
Maryland Franchise Registration Filing
The initial filing fee is $500 and must be accompanied by the following documents:
- Uniform Franchise Registration Application with Certification
- Uniform Franchise Consent to Service of Process
- Corporate Acknowledgement
- Franchisor's Costs and Source of Funds
- Franchise Seller Disclosure Form
- Consent of Accountant
- Franchise Advertising Material
- A Clean Copy of the Franchise Disclosure Document
Maryland Fee Deferrals
Maryland may require a fee deferral, which requires a deferment on the payment of initial franchise fees until the franchisor has completed its pre-opening obligations and is open for business. Md. Business Regulation Code Ann. § 14-217.
Maryland does have a Surety bond and Escrow option. The Escrow option requires a bank with branches in Maryland to serve as an Escrow Agent. The Escrow option requires both Maryland and Franchisee Approval to release funds.
Since Maryland requires the franchisee to be open for business, the surety bond is a great option, especially where there is a buildout so the franchisor can receive the initial franchise fee without an extended delay.
However, a surety bond requires a franchisor to apply for the bond, go through underwriting, give a personal guarantee in some situations, and pay a premium of 1-3% of the bond amount normally.
The Fee Deferral requirement is generally an easier path with less state involvement, but it may not be suitable for everyone.
Maryland Franchise Advertisement Requirements
A person may not publish an advertisement offering to sell a franchise subject to registration under this subtitle unless:
(1) the person submits a copy of the advertisement to the Commissioner for review at least 7 business days before the first publication of the advertisement unless the Commissioner by regulation or order allows a later submission; or
(2) the advertisement is exempted from review by regulation of the Commissioner. Md. Business Regulation Code Ann. § 14-225.
Maryland Franchise Amendments
Maryland requires an amendment filing if there is a material change in the information that a registrant previously filed with Maryland.
Maryland defines a material change broadly and includes:
- The termination of more than 10 percent of the franchises in the State during any 3-month period
- The termination of more than 5 percent of the franchises of the franchisor regardless of location during any 3-month period
- A reorganization of the franchisor
- A change in control, corporate name, or state of incorporation of the franchisor
- The commencement of any new product, service, or model line requiring additional investment
- The discontinuation or modification of the marketing plan or system of any product or service of the franchisor which accounts for at least 20 percent of the annual gross sales of the franchisor.
Maryland Franchise Renewals
The renewal filing fee is $250 and must be accompanied by the following documents:
- Uniform Franchise Registration Application with Certification
- Uniform Franchise Consent to Service of Process
- Corporate Acknowledgement
- Franchisor's Costs and Source of Funds
- Franchise Seller Disclosure Form
- Consent of Accountant
- Franchise Advertising Material
- A Clean and Marked Copy of the Franchise Disclosure Document
More Information About Maryland's Franchise Laws
Maryland Business Opportunity Laws
Maryland also has Business Opportunity laws, which define a “business opportunity” as an arrangement between a buyer and seller in which:
- Represents that the seller will provide locations or assist the purchaser in finding locations for the use or operation of vending machines, racks, display cases or other similar devices, or currency-operated amusement machines or devices, on premises neither owned nor leased by the purchaser or seller; or
- Represents that it will provide or assist the purchaser in finding outlets or accounts for the purchaser’s products or services.
- Represents that it will purchase any or all products made, produced, fabricated, grown, bred or modified by the purchaser using in whole or in part the supplies, services or chattels sold by the seller to the purchaser; or
- Guarantees that the purchaser will derive income from the business opportunity which exceeds the price paid for the business opportunity, or that the seller will refund all or part of the price paid for the business opportunity, or repurchase any of the products, equipment, supplies or chattels supplied by the seller, if the purchaser is not satisfied with the business opportunity; or
- Represents that the seller will provide a sales program or marketing program which will enable the purchaser to derive income from the business opportunity which exceeds the price paid for the business opportunity. Md. Business Regulation Code Ann. § 14-101.
Maryland Business Opportunity Registration
The sale of business opportunities in Maryland requires filing a Written Disclosure Statement, consent to service of process, and paying a filing fee to the state of Maryland.
Maryland Business Opportunity Franchise Exemption
Franchises are excluded from the Business Opportunities Laws. Md. Business Regulation Code Ann. § 14-104.
You can access the Business Opportunities Securities at this link: https://www.marylandattorneygeneral.gov/Pages/Securities/forms.aspx
If you offer a business opportunity in Maryland, we can help you determine if, and how, your company must comply with Maryland’s franchise or Business Opportunity Laws.
Want to learn more about our franchise services and franchising in Maryland? Contact Us or call (757)-263-4596 to schedule a consultation. You can also visit our interactive map to learn more about other state franchise laws.
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