Maryland Just Rewrote Its 1981 Franchise Law — Here's What Changes Oct. 1

A Law From the Reagan Era Just Got Its First Real Update

If you own a franchise in Maryland — or you're a franchisor selling into the state — a set of rules that hasn't changed in more than four decades is about to look very different. On October 1, 2026, the Maryland Franchise Reform Act takes effect, marking the first substantial overhaul of the state's Franchise Registration and Disclosure Law since 1981. For franchise owners, the changes aren't cosmetic. They rewrite how long you have to sue over a bad deal, whether you can legally organize with other franchisees in your system, and how fast the state processes the paperwork that keeps your brand's disclosure documents current.

The bill, filed as SB 415 and HB 730, passed the Maryland General Assembly with overwhelming bipartisan support and was signed into law by Governor Wes Moore on May 13, 2026. The International Franchise Association, which represents thousands of franchise brands, publicly praised the reform — a rare moment of agreement between franchisors and the franchisee advocates who pushed for stronger protections in the same bill.

The Change That Matters Most: You Now Have More Time to Sue

Under the old law, a franchisee who discovered a disclosure violation had exactly three years from the date they purchased the franchise to bring a legal claim — regardless of when their location actually opened. For franchise concepts that require a long build-out period (a new restaurant space, a gym build, a retail buildout with permitting delays), that clock could run out before the franchisee even opened the doors.

Starting October 1, the deadline changes to whichever comes later: four years from the date of purchase, or two years after the franchisee opens for business to the public. That's a meaningful shift. Franchise attorneys have pointed out that many disclosure problems — misrepresented earnings claims, undisclosed litigation history, hidden fees — don't actually surface until a franchisee is up and running and comparing their real numbers to what they were promised. The old law could bar a claim before a franchisee even had the operating history to know they'd been misled. The new law gives them a real window to find out.

Franchisees Can Now Organize — And Sue If They're Blocked

The reform also creates a new statutory right for franchisees to associate with other franchisees in their own brand "for any lawful purpose," including forming groups to raise collective grievances with a franchisor. This has long been a point of friction in the franchise world: some franchise agreements have discouraged or effectively penalized franchisees who compared notes with each other about royalty disputes, supply chain issues, or unfair terminations.

Maryland's new law goes further than simply stating the right exists. Franchisees who are blocked or retaliated against for exercising it now have a private right of action — meaning they can sue directly over the interference, without needing a regulator to step in first. For an owner who has ever felt isolated dealing with a franchisor on their own, this is a structural change, not just a talking point.

Geography Now Matters for Who Can Sue Whom

Previously, a franchisor based in Maryland could, in theory, face lawsuits from franchisees operating anywhere in the country under Maryland's law. The reform narrows that: going forward, only franchisees actually operating in Maryland can bring claims against a Maryland-based franchisor under this statute. It's a change aimed at giving franchisors more predictability about their legal exposure, while keeping the protections intact for the in-state business owners the law was written to protect.

Faster Paperwork, Finally

The less dramatic but very practical piece of the reform: Maryland's Franchise Fast Track Pilot Program, which launched in October 2025 to speed up the review of Franchise Disclosure Document renewals, is now made permanent law with a six-year run. Franchisors selling into Maryland still have to register annually and submit their FDD to the Securities Commissioner for approval before offering franchises in the state — that requirement hasn't gone anywhere. What's changed is the speed of that review, plus new reporting requirements so the legislature can track whether the faster process is actually working. The law directs a report back to lawmakers by 2031 on FDD review times and how Maryland compares to other states.

What Existing Franchise Owners Should Actually Do

• If you already own a Maryland franchise, you don't need to file anything urgently — the new rules apply automatically, and existing agreements aren't required to be renegotiated on an emergency basis.
• Any Franchise Disclosure Document offered to a new buyer after October 1, 2026 must comply with the updated law, so if you're planning to sell your franchise location, timing matters.
• If you've had a dispute with your franchisor that you assumed was time-barred under the old three-year rule, it's worth having a franchise attorney check whether the new window changes your options — especially if your location opened late.
• If you've wanted to compare notes with other franchisees in your system but worried about your agreement's restrictions, the new associational right gives you clearer legal footing to do so.

What This Means If You're Considering Buying a Franchise

Franchise buyers in Maryland now get a longer runway to discover and act on problems with their disclosure documents — which is exactly the period when most first-time franchise owners are least equipped to spot red flags. Before signing, it's worth treating the entity you'll operate under as a decision that deserves as much scrutiny as the franchise agreement itself. Many new franchisees default to forming an LLC without comparing it against other structures; if you're unsure which fits your situation, our guide on LLC vs. S corp walks through the tradeoffs for a single-location owner-operator.

It's also worth lining up financing options early. Franchise purchases are commonly funded through SBA-backed loans, and lenders will often want to see your business structure, your EIN, and a dedicated business bank account already in place before they'll move your application forward. Getting those pieces in order before you're deep into franchise disclosure review saves weeks later.

Why This Is Bigger Than Maryland

Franchise law is set state by state, and most states haven't touched their franchise statutes in a generation. Maryland's law was written in 1981 — the same year IBM released its first PC. Franchise industry groups have flagged Maryland's update as a potential model other states may look to, particularly the extended litigation window tied to a franchisee's actual opening date rather than a flat purchase-date clock. If you operate a franchise outside Maryland, it's worth keeping an eye on whether your own state legislature starts moving in a similar direction — especially if you've ever felt the current rules protect the franchisor's paperwork more than the franchisee's investment.

For now, the practical takeaway for Maryland franchise owners is straightforward: the clock on your legal options just got longer, your right to talk to other franchisees in your brand is now written into law, and the disclosure documents your franchisor files should start moving through the state faster. None of that requires you to do anything before October 1 — but all of it is worth understanding before your next renewal, dispute, or resale.

Before October 1, Small Business Owners Should:

• Confirm with a franchise attorney whether any past disputes fall inside the new four-year/two-years-after-opening window.
• Review your franchise agreement's language on franchisee associations in light of the new statutory right.
• If buying a franchise soon, make sure your business license and entity paperwork are lined up so you're not delayed once your FDD clears the state's faster review process.
• Keep your profit and loss statement current — a longer post-opening window to sue over earnings misrepresentations is only useful if you can show what your business actually earned versus what was promised.

Photo by Branden Skeli on Unsplash