Maryland Revises Statute To Change Delivery Timing Requirements

Maryland is one of only 5 states that still adhere to the old standards for delivery of the FDD to a prospective franchisee, requiring that the FDD be delivered at the earlier of the first personal meeting held to discuss the franchise sale or at least 10 business days before the prospective franchisee signs a binding agreement with, or makes a payment to, the franchisor or the franchisor’s affiliate in connection with the proposed franchise sale.

A new change in the Maryland statute will revise the delivery requirements to coincide with the requirements under the revised FTC Franchise Rule. After October 1, 2010 in Maryland, the FDD must be delivered at the earlier of: (a) 14 calendar days before the prospective franchisee signs any binding agreement with the franchisor or pays any consideration that relates to the franchise relationship; or (b) a prospective franchisee’s reasonable request to receive a copy of the FDD. This change makes the Maryland requirements substantially similar to the requirements under the FTC Franchise Rule.

Currently, most franchisors include a separate disclosure in their FDDs’ Receipt page that identifies the different delivery requirements under Maryland law. By October 1, 2010, every franchisor that provides this additional Maryland disclosure should revise its Receipt page to delete the reference to the old Maryland delivery requirements.

Maryland has issued an Interpretive Opinion that provides that this change, in the absence of other material changes, will not require an amendment filing to any current Maryland registration. The Interpretive Opinion also provides that Maryland will not pursue any action against a franchisor that begins to comply with the changed requirements before the October 1, 2010 implementation date. However, this position will not change the statutory right of action that a prospective franchisee may have, so the safest course of action is to begin complying with the new requirement on October 1, 2010, rather than before.