Maryland Is Giving Franchisees More Time and More Power to Protect Themselves
Relevant FDD Topics: Item 3, Item 20, Franchise Agreement
This report is for educational purposes only and is not legal advice. The statements and conclusions expressed herein are the opinions of the author based on publicly available information and the cited sources. Prospective and current franchisees should consult qualified legal counsel regarding their individual circumstances.
Franchisees are routinely described as independent business owners.
Beginning October 1, 2026, Maryland is putting a little more force behind the word independent.
The state's newly enacted Franchise Reform Act changes Maryland's franchise laws in several important ways. It gives certain franchisees more time to pursue claims arising from violations of the state's franchise law. It gives state regulators more time to take enforcement action. And perhaps most importantly, it expressly protects a franchisee's right to join an association of other franchisees in the same system and to freely associate with other franchisees for lawful purposes.
And Maryland didn't simply declare that right.
It gave franchisees a way to enforce it.
Under the new law, a franchisor cannot directly or indirectly restrict or inhibit a franchisee from joining a trade association consisting of franchisees of the same franchise, nor can it prohibit free association among franchisees for lawful purposes. A violation can result in a civil action seeking injunctive relief, damages where applicable, court costs and reasonable attorney's fees. A franchisee seeking an injunction does not have to prove actual damages first.
That deserves more attention than it is likely to receive.
Because franchisees talking to each other may be one of the most powerful forms of due diligence and accountability available in franchising.
The Federal Franchise Rule Doesn't Solve Everything
The United States has a federal franchise disclosure system. It does not have a comprehensive federal franchise relationship law.
That distinction matters.
The FTC Franchise Rule primarily regulates disclosure before the sale. It requires franchisors to provide prospective franchisees with a Franchise Disclosure Document containing 23 prescribed Items before the franchise is sold.
But disclosure and enforcement are two very different things.
A prospective franchisee can receive hundreds of pages of disclosure documents, sign a franchise agreement, invest hundreds of thousands of dollars and discover months or years later that the reality of operating the business looks very different from what they believed they were buying.
By then, the disclosure period is long over.
The question becomes what rights the franchisee actually has after the investment has been made.
Those rights can depend significantly on where the franchise operates.
Maryland is one of the states that regulates franchise sales beyond the federal baseline. Its 2026 Franchise Reform Act now expands some of those protections further. The legislation passed the Maryland Senate 45-0 and the House 113-10 before being signed into law in May.
And one of its most interesting provisions has very little to do with the FDD itself.
It deals with franchisees talking to one another.
Why Would Franchisees Need a Legal Right to Talk to Each Other?
This is the part of the legislation that should make the franchise industry stop and think.
If franchisees are truly independent business owners, their ability to communicate with other owners in the same system should be unremarkable.
Of course they should be able to compare experiences.
Of course they should be able to discuss vendors.
Or marketing.
Or system changes.
Or profitability.
Or support.
Or litigation.
Or whether other franchisees are experiencing the same operational problem.
And, if they choose, they should be able to organize.
Maryland has now made that principle explicit.
The law states that franchisees have the right to join and participate in a trade association consisting of other franchisees of the same franchise for any lawful purpose. It then prohibits the franchisor, including through its officers, agents or employees, from directly or indirectly restricting or inhibiting that right.
The words directly or indirectly matter.
A franchisor doesn't necessarily have to issue a memo saying, "Do not talk to other franchisees" for franchisees to perceive pressure against organizing.
The more complicated questions arise around conduct.
What happens when franchisees begin comparing numbers?
What happens when several operators discover they are experiencing the same problem?
What happens when an independent franchisee association begins challenging a systemwide policy?
What happens when franchisees collectively question a vendor relationship, technology mandate, marketing expenditure or operational change?
And what happens when franchisees believe participating in those conversations could affect their relationship with the franchisor?
Maryland's legislature has now drawn a clearer line.
Franchisees have a statutory right to associate.
The Enforcement Provision Is What Gives That Right Teeth
There is an important difference between saying someone has a right and giving them a practical mechanism to enforce it.
A person who violates the new association protections may be sued in circuit court for temporary or permanent injunctive relief, damages where applicable, and costs including reasonable attorney's fees. Importantly, a franchisee seeking injunctive relief does not have to allege or prove that actual monetary damages have already occurred.
Think about why that matters.
Suppose the alleged harm isn't that a franchisee has already lost $100,000.
The alleged harm is that conduct is interfering with franchisees' ability to organize.
Waiting until the franchisee can prove a specific financial loss could make the right practically meaningless.
An injunction is different. It allows a court to potentially stop prohibited conduct.
Maryland has therefore created not merely a statement of public policy, but an enforcement mechanism.
That is an important distinction in franchising.
Maryland Is Also Giving Franchisees More Time
The second major change addresses another practical problem: the franchise clock starts long before many franchise problems become visible.
Previously, Maryland generally required an action under its franchise civil-liability provision to be brought within three years after the grant of the franchise.
The new law changes that calculation.
The enacted legislation provides a limitations period based on the earlier of four years after the grant of the franchise or two years after the franchise opened to the public.
That may sound like a technical statutory change.
In practice, it recognizes something fundamental about how franchises are actually developed.
A franchisee can sign an agreement months before opening.
Then comes financing. Site selection. Lease negotiations. Permitting. Construction. Equipment. Training. Hiring. Pre-opening marketing. And delays.
During that entire period, the franchisee may have no meaningful way to evaluate what operating the franchise will actually be like.
The business isn't operating yet.
There are no actual labor costs.
There are no local sales.
There is no real food cost or product cost.
There is no experience with the franchisor's ongoing support.
There is no actual customer acquisition cost.
There is no way to know whether the operational model works in that franchisee's market.
Yet under a limitations period tied solely to the date the franchise was granted, the clock can already be running.
Maryland's revised law does not give franchisees unlimited time. Far from it. But incorporating the opening date into the calculation acknowledges an obvious reality:
You cannot fully discover what it means to operate a franchise before you have actually operated the franchise.
There Is Another Side to the Legislation
Interestingly, the Franchise Reform Act isn't simply an anti-franchisor bill.
Maryland is simultaneously attempting to make its franchise registration system more efficient.
The legislation establishes a Franchise Disclosure Document renewal fast-track review pilot program designed to expedite qualifying franchise registration renewals. The program includes reporting and evaluation requirements and is scheduled to operate for a limited period.
That matters because it complicates the usual framing of franchise regulation as a choice between protecting franchisees and supporting franchise growth.
Maryland is attempting to do both.
Streamline the regulatory process for franchisors while strengthening particular protections for franchisees.
Those ideas are not inherently incompatible.
A functioning franchise regulatory system should be capable of making legitimate compliance more efficient while still providing meaningful remedies when the rules are violated.
Maryland Isn't Alone
This development also comes at an interesting time.
Virginia recently enacted legislation addressing another controversial franchise relationship issue: post-termination noncompete restrictions.
The issues are different.
The underlying question is not.
How much control should one party to the franchise relationship retain over the other after the franchise agreement is signed?
For decades, much of American franchise regulation has focused heavily on what must be disclosed before the investment.
Increasingly, state legislatures are confronting what happens after the investment.
That is where many of the most consequential franchise disputes occur.
The franchisee has already signed.
The money has already been spent.
The lease has already been guaranteed.
Employees have been hired.
Equipment has been purchased.
And the franchisee may have personally guaranteed obligations that will survive even if the business does not.
At that point, another FDD disclosure doesn't solve the problem.
Relationship law matters.
The Bigger Question for Franchising
Maryland's legislation isn't going to rebalance the entire franchise relationship.
It doesn't eliminate franchise agreements.
It doesn't prevent franchisors from enforcing legitimate system standards.
It doesn't guarantee franchisee profitability.
And it certainly doesn't eliminate disputes.
But it does something worth noticing.
It recognizes that franchisees need meaningful opportunities to enforce the protections they already have and that franchisees should be able to communicate and organize without interference.
That brings us back to the industry's favorite description of the franchise model.
Independent business ownership.
Independence cannot exist only when liability needs to remain with the franchisee.
If franchisees are independent business owners when they sign leases, hire employees, borrow money, guarantee debt, absorb operating losses and face business failure, then their independence should matter when they communicate with one another too.
Maryland has now put that principle into law.
And when state after state begins revisiting pieces of the franchise relationship, the larger story isn't any single statute.
The larger story is why lawmakers increasingly believe these protections need to be written into statutes in the first place.
That is the conversation the franchise industry should be having.
