Maryland Franchise Launch: Secure Leases, Settle Disputes

Why Maryland-Specific Planning Matters

Maryland regulates the offer and sale of franchises and imposes requirements that can affect lease negotiations and dispute strategy. Tailoring your lease and franchise documents to Maryland’s rules and practices, rather than relying on a one-size-fits-all template, can reduce risk, speed up openings, and preserve brand standards. For filings and process details, see the Maryland Securities Division’s franchise resources (MD OAG Securities Division).

Securing the Right Site and Lease

Site selection and control are the foundation of franchise success. In Maryland, franchise parties should coordinate the franchise agreement and the lease to avoid conflicts. Consider:

• Use and exclusivity: Confirm permitted use, signage rights, hours, and any exclusives or protected areas that align with your brand and the franchise agreement.
• Assignment and subletting: Negotiate a landlord consent standard that accommodates franchisor transfer, brand-mandated remodels, and successor franchisees.
• Franchisor protections: Seek a collateral assignment of lease or a franchisor step-in/right to cure to maintain operations if the franchisee defaults.
• Build-out and compliance: Allocate responsibility for permits, code compliance, grease traps/venting, ADA accessibility, and utility capacity. Clarify delivery timelines and remedies for landlord delays.
• CAM and operating costs: Define what expenses are included, audit rights, caps on controllable costs, and fair gross-up and casualty rules.
• Casualty/condemnation and co-tenancy: Ensure reopening standards and rent abatement align with franchise system requirements and marketing plans.
• Personal guaranties and security: Calibrate guaranty scope and consider springing or burn-off provisions tied to performance milestones.
• Environmental and food-service issues: Allocate hazardous materials responsibilities, grease management, and pest control to avoid operational disruptions.

Coordinate Franchise and Lease Documents

Misalignment between the lease and the franchise agreement creates avoidable disputes. Align:

• Term and options: Ensure lease term and renewal options support the franchise term, including any development schedules and remodel cycles.
• Operating covenants: Hours, product mix, and brand standards in the franchise agreement should be permissible under the lease.
• Default and cure: Mirror notice and cure periods where possible so franchisor rights and landlord remedies do not collide.
• Insurance and indemnity: Match required coverages, additional insureds, waiver of subrogation, and limits across documents.

Maryland Franchise Law Highlights

Maryland law addresses disclosures, relationship issues, and dispute remedies:

• Disclosure and registration: Franchisors offering or selling in Maryland generally must register and comply with state disclosure requirements before offering or selling franchises in the state, administered by the Securities Division (MD OAG). Federal disclosure timing also applies under the FTC Franchise Rule (typically at least 14 calendar days before signing or payment) (16 C.F.R. Part 436).
• Relationship and terminations: Maryland’s franchise statute and related law include relationship protections that can affect termination and nonrenewal. Franchisors should evaluate any Maryland-specific good-cause, notice, and cure requirements that may apply in context (Md. Code, Bus. Reg. Title 14, Subtitle 2).
• Venue and governing law: Review choice-of-law and forum clauses for Maryland enforceability considerations, especially where Maryland registration or public-policy rules could be implicated.
• Advertising and financial performance representations: Ensure marketing and earnings claims conform to federal and state disclosure rules before solicitation or signing (FTC Franchise Rule).

Preventing and Resolving Disputes

A practical dispute plan starts early:

• Early issue spotting: Use pre-opening checklists and landlord coordination calls to resolve build-out, signage, or permit issues before they escalate.
• Notice and documentation: Follow contract notice provisions precisely; keep contemporaneous records of delays, costs, and cure efforts.
• Informal resolution: Consider structured negotiation or executive-level meetings before formal proceedings.
• Mediation and arbitration: Many franchise agreements include ADR provisions. Verify how any Maryland requirements interact with the FAA and your arbitration clause, including any carve-outs for injunctive relief.
• Court actions and injunctions: When protecting trademarks, system standards, or site control, evaluate temporary or preliminary injunctive relief and the interplay with any arbitration clause.

Common Pitfalls in Maryland Franchise Leasing

• Inconsistent use clauses that restrict brand-required products or hours.
• Missing step-in rights that prevent a franchisor from operating after a franchisee default.
• Lease assignment clauses that block transfers to qualified successor franchisees.
• Ambiguous build-out timelines without defined remedies.
• CAM definitions that include capital expenditures or unrelated landlord costs.
• Overbroad personal guaranties without burn-off mechanics.
• Dispute provisions that conflict with Maryland franchise relationship protections.

Action Plan for a Maryland Launch

• Engage Maryland franchise counsel early to align registration, FDD updates, and lease strategy.
• Negotiate a letter of intent that captures key deal points: rent economics, assignment rights, build-out allowances, signage, exclusivity, and delivery conditions.
• Map critical path dates for permits, construction, inspections, and training alongside disclosure timing.
• Prepare landlord estoppels and recognition agreements reflecting franchisor collateral assignment and cure rights.
• Implement a dispute protocol: internal escalation, mediation window, and criteria for seeking injunctions or initiating arbitration.

FAQ

Do franchisors need to register in Maryland before offering franchises?

Generally yes. Most franchisors must register with the Maryland Securities Division and provide compliant disclosures before offering or selling in the state. See the agency’s guidance (MD OAG).

How should lease terms relate to the franchise agreement?

Match term and options, align default and cure periods, and include franchisor step-in and assignment rights to avoid operational conflicts.

Are arbitration clauses enforceable for Maryland franchise disputes?

Often yes, subject to the Federal Arbitration Act and any applicable Maryland public-policy considerations. Ensure carve-outs for injunctive relief if brand protection is critical.

What timeline should I expect from LOI to opening?

Timelines vary by site and jurisdiction. Build a critical path covering registration status, permitting, construction, inspections, training, and vendor lead times.

How We Help

We counsel franchisors, multi-unit developers, and single-unit operators on Maryland registration and disclosure, site selection and leasing, and dispute resolution. Our team coordinates with brokers, architects, and contractors to keep your project on track and resolves conflicts efficiently to protect brand value.

Ready to launch or expand in Maryland? Contact our team for tailored guidance.

References

• Maryland Securities Division — Franchise Registration
• Maryland Code, Business Regulation, Title 14 (including Subtitle 2 – Franchises)
• FTC Franchise Rule, 16 C.F.R. Part 436

Last reviewed: 2025-10-31

Disclaimer: This blog is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. Maryland law can change and may apply differently based on specific facts. Consult qualified Maryland counsel about your situation.