In 2026, various states reformed franchise laws to significantly impact the franchisor-franchisee relationship. Recently, Maryland lawmakers approved legislation that follows this trend.
On May 12, Gov. Wes Moore signed Senate Bill 415 and House Bill 730 into law. The bills, referred to as the Maryland Franchise Reform Act, substantially alter the Maryland Franchise Registration & Disclosure Law by updating franchisee protections and streamlining registration procedures. The bill takes effect on Oct. 1.
How does the Maryland Franchise Reform Act Protect Franchisees?
Right to Join an Association
The Franchise Reform Act protects franchisees’ ability to “join a trade association consisting of other franchisees of the same franchise…for any lawful purpose.” Franchisees often join franchise associations to stay up to date on developments in the system, communicate with one another on issues affecting operations, or collectively negotiate with the franchisor.
If franchisors restrict a franchisee’s ability to associate, franchisees can sue and seek:
- Injunctive relief
- Damages
- Reimbursement of legal costs and reasonable attorneys’ fees
Franchisees must bring this action within two years after the alleged violation happened, or one year after discovering the facts of the alleged violation.
Increased Time for Private Claims
Maryland franchisees gain more time to bring liability claims against franchisors that violate Maryland registration or disclosure laws. A franchisee must file suit by the earlier of:
- Four years after they bought the franchise, or
- Two years after the franchise opened to the public.
Previously, the statute of limitations was three years from the date of purchase, regardless of when the franchise location opened. The change supports franchisees who discover disclosure issues only after beginning operations.
How Does the Legislation Helps Franchisors?
Originally, Maryland launched the Franchise Fast Track Pilot Program in Oct. 2025 to accelerate the franchise registration renewal process in the state.
Maryland is a franchise registration state that requires annual renewal of a franchise disclosure document. Most franchisors file renewals from March to May each year, creating backlogs and processing delays that stall franchise sales.
The Fast Track Program allows previously registered Maryland franchisors in good standing with fiscal year-ends between Dec. 24 and Jan. 7 to file their Franchise Disclosure Documents, required application forms, and cover letters opting in to the Fast Track Program between Jan. 1 and Feb. 1.
After the Securities Division audits the submission, the franchisor must update and finalize their submission by April 10. The program’s priority for early filers promotes regulatory efficiency and enables franchisors to resume franchise sales as quickly as possible.
The Franchise Reform Act directs the Securities Commissioner to extend this program until 2031 and provide comprehensive data on its results.
If the Fast Track Pilot Program continues to demonstrate improved efficiency, other states may consider similar expedited registration frameworks.
What Else Should Franchisors Know?
Scope of Liability
Maryland lawmakers expanded the potential liability for franchise registration and disclosure violations. In addition to franchisors, liability may also extend to controlling persons, partners, directors, and employees who materially aid in the violation.
In determining liability, the franchisor must prove they were unaware and could not have reasonably known about the misleading statements or omissions in the FDD.
The expanded liability exposure and previously mentioned statute of limitations apply only to:
- Franchisees who reside in Maryland, or
- Franchised businesses that operate or will operate in Maryland.
Expansion of Securities Commissioner Authority
The reform extends the enforcement authority of the Maryland Securities Commissioner and increases the time period in which the Commissioner may pursue violations of Maryland franchise law from three to five years.
The Commissioner also retains the authority to seek cease-and-desist orders, injunctions, restitution, and other equitable remedies for franchise law violations.
What does the Reform Act Signal for Franchising?
The Maryland General Assembly acknowledges the role franchising plays in the state’s economy. The Reform Act is part of the state’s regulatory goal, promoting transparency, accountability, and fair dealing in franchise sales while still supporting the growth of state franchising.
Although it specifically addresses Maryland franchise relationships, the legislation aligns with Virginia’s House Bill 69 and California’s SB 919 in reflecting a broad national trend toward expanded franchisee protections.
In light of recent legislative developments impacting interstate franchise relationships, it behooves franchisors and franchisees to monitor similar activity and ensure compliance with potential legislative changes.
