3.2.10 Maryland

Fees

*Renewal filings must be submitted before the expiration date or Maryland will require the filing be resubmitted as a new initial filing with payment of the initial fee.

**Post-Effective Amendment filings must be submitted if you are making a material change to your FDD after your initial or renewal filing is approved.  Pre-Effective Amendment filings are submitted if you are making a material change to your FDD but your initial filing or renewal filing is not yet approved.  No further sales may be made in Maryland until the amended FDD is approved and the registration is effectively amended.

Notes

• The preferred method for filing in Maryland is through an online portal created by the industry for registration states. The filing fees are also paid through the portal via ACH.  You will be required to complete and submit an ACH authorization form to us before we will submit the filing for you.  Transaction fees apply for each filing with the current rate being $100 per.
• Maryland will accept unaudited financials for first-year startup franchisors, but then will impose a financial assurance. The state may also require the submission of unaudited financials to supplement the audit in certain circumstances.
• No deals may be closed in Maryland until the initial, renewal or amendment filing is approved, and all Maryland prospects must be disclosed/redisclosed with the approved FDD. In limited circumstances you may be able to disclose a Maryland prospect while a renewal or amendment is pending – please contact your Spadea legal team for further direction.
• If you are a Maryland-based franchisor, you cannot sell anywhere until Maryland has approved your initial, renewal or amendment filing.
• Advertising – Any advertising that will be used by you to target prospects in Maryland or will be published and used only in Maryland, must be filed with the state at least seven days prior to its first use. If we do not receive a comment or response from the state on the filing in those seven days, you are free to use the advertising.
• Financial Assurance – If the Commissioner finds you do not have adequate financial arrangements to fulfill your obligations to franchisees, the Commissioner may require some form of financial assurance be instituted, such as an escrow, deferral of initial fees, or posting of a surety bond.

Exemptions (from registration with the state and/or from disclosure with a specific prospect)

• Large Franchisors – exemption from registration only
  • Two criteria must be met:
    • Net Worth
      • Minimum of $10,000,000 (on consolidated basis) or $1,000,000 and you are at least 80% owned by an entity that has (a) net equity (on a consolidated basis) of no less than $10,000,000; and (b) will guarantee your performance obligations
    • Experience
      • At least 25 franchisees conducting the same franchised business at all times during the immediately preceding five-year period
  • We must submit an initial filing at least ten days prior to any offer under this exemption, and annual renewal filings are required to be filed ten days before the prior filing’s expiration.
  • Fees:

• Large Investment – exemption from registration only
  • Requires initial investment by franchisee of more than $750,000
  • We must submit an initial filing at least ten days prior to any offer under this exemption, and annual renewal filings are required to be filed ten days before the prior filing’s expiration.
  • Fees:

• Sales to Existing Franchisees – exemption from registration only
  • Offer to sell or sale of a franchise that is substantially similar to a franchise already owned by the offeree or buyer
  • No filing or fees are required
• Renewal of an Existing Agreement – exemption from registration and disclosure
  • Where an existing franchise is being renewed or extended and where there was no interruption in the operation of the franchised business
  • No filing or fees are required
• Sales by Existing Franchisees – exemption from registration only
  • The offer to sell or sale of a franchise by a franchisee for the franchisee’s own account
  • Offer also extends to the offer to sell or sale of the entire area franchise owned by a subfranchisor for the subfranchisor’s own account.
  • No filing or fees are required
• Sales by Executor, Trustee, etc. – exemption from registration only
  • Exemption applies in cases where the transaction is by an executor, administrator, sheriff, receiver, trustee in bankruptcy, guardian, or conservator
  • No filing or fees are required
• Sales to Bank – exemption from registration only
  • Where the offer and sale is to a bank or similar financial institution and where (a) the purchaser is acting for itself or in a fiduciary capacity; and (b) the franchise is not being purchased for resale
  • We must submit a filing – for each transaction of this kind – at least ten days prior to any offer under this exemption. No renewals are required and each filing is only good for that one transaction.
  • Fees:

• Out of State Sales – exemption from registration only
  • Where the offer or sale is made to a prospective franchisee who (or which) is a resident of a foreign state, territory, or country, provided that all of the following apply:
    • To your knowledge, the prospect not a resident of Maryland
    • The franchised business will not be operated wholly or partially in Maryland
    • Sale of the franchise does not violate (i) the laws of any other state, territory, or country where the prospective franchisee is a resident or (ii) the anti-fraud provisions of the Maryland Franchise Law.
  • No filing or fees are required
• Non-Franchisor Exemptions – The following exemptions are for atypical franchise offerings, are very rare, and in general, will not apply to you if you are an active franchisor with an FDD.
  • Nominal Fee
  • Bank Credit Card Plans
  • By Order, Discretionary Exemption, or Interpretive Opinion
  • Trading Stamp Programs
  • Consignment Sales
  • Gasoline Distributors