Maryland's Franchise Reform Act of 2026: What Changes and Why It Matters

The enforcement window - the period during which state regulators can bring enforcement actions for violations of Maryland franchise law - extends from 3 to 5 years. This is a regulator-facing change, not a private-party change (that's addressed by change #3).

Why it matters for franchisors: Any Maryland franchise registration, disclosure, or sales practice violation now has a 5-year exposure window. Franchisors should conduct compliance audits going back further than previously warranted, and should tighten documentation of their disclosure timelines, franchisee receipt confirmations, and exemption analyses.

Why it matters for franchisees: State regulators now have more runway to investigate and prosecute franchisor misconduct that came to light after the old 3-year window would have expired. This is particularly relevant for systemic disclosure violations that affected multiple franchisees over several years.

Maryland franchise law provides registration exemptions for franchisors meeting certain financial criteria - historically fixed dollar thresholds for metrics like minimum net worth. The Reform Act requires these thresholds to be adjusted annually based on the Consumer Price Index (CPI).

Compliance implication: Franchisors currently relying on an exemption from Maryland registration should verify that their net worth (or other qualifying metric) still meets the adjusted threshold under the new CPI-indexed standard. Exemption qualification needs annual re-verification, not just one-time confirmation.

This is the most significant change for franchisees. The civil SOL for franchise claims is extended and restructured:

• Option A
  5 years from the date of franchise grant

  The hard outer limit. No franchise claim can be brought more than 5 years after the franchise agreement was executed.

• Option B
  3 years from commencement of operations + 2 years discovery extension

  The discovery-based clock. Runs from when the franchisee opened for business, plus an additional 2 years from when they reasonably discovered (or should have discovered) the violation.

The practical effect: a franchisee who opens in January 2024 under an FDD that concealed material information has until at least January 2027 (3 years from operations start) - and potentially January 2029 if the concealment wasn't discoverable until late in the period. Under the prior 3-year SOL running from grant (not operations start), many claims would already be time-barred before the franchisee accumulated enough operating experience to recognize them.

For franchisors: This increases the period during which Maryland franchisees can bring claims. Document-retention policies should be extended accordingly. Disclosure practices - particularly around Item 19 financial performance representations and Item 20 franchisee contact lists - become more important, as claims can now surface years later when records may be incomplete.

Maryland becomes one of a small number of states to codify - with meaningful enforcement teeth - a franchisee's right to organize, communicate, and form associations with other franchisees without franchisor retaliation.

The distinction from prior law is important: this isn't just a declaratory right - it comes with real legal remedies. Franchisees whose right to associate is violated can seek damages, injunctive relief, and potentially attorneys' fees. This transforms a theoretical protection into an actionable one.

For franchisees in Maryland systems, this law provides cover to organize and negotiate collectively - a materially stronger position than the historically atomized franchisee-franchisor dynamic. For franchisors, franchise agreements should be reviewed to remove any provisions that could be characterized as anti-association under the new standard.

Maryland's Division of Securities is authorized to launch a pilot program for expedited FDD renewal processing for qualifying franchisors. The standard review process in registration states can create 60–120 day delays - during which franchisors operating under an expired registration must either halt Maryland franchise sales or rely on an exemption.

A fast-track pathway - likely targeting franchisors with clean compliance histories, no pending regulatory actions, and complete initial filings - could compress the renewal review to 30 days or less. This benefits franchisors who need to update their FDDs quickly to reflect material changes (litigation outcomes, new Item 19 data, financial statement updates) and reduces the compliance limbo period.

What franchisors need to do: Monitor the Maryland Division of Securities for guidance on pilot eligibility criteria. Franchisors who have had prior registration issues, deficiency letters, or enforcement inquiries from Maryland will likely not qualify for fast-track treatment. Clean filers with multiple years of timely, complete renewals are the most likely candidates.