Code of Maryland Regulations › Title 02 - OFFICE OF THE ATTORNEY GENERAL › Subtitle 02 - DIVISION OF SECURITIES › Chapter 02.02.08 - Franchise Registration and Disclosure › Section 02.02.08.16 - Fraudulent and Prohibited Practices

Current through Register Vol. 51, No. 14, July 12, 2024
A. Scope of Antifraud Provisions. Unless otherwise indicated, the antifraud provisions of the Maryland Franchise Law, Business Regulation Article, §
									14-229, Annotated Code of Maryland, and this regulation apply to any offer to sell or sale of a franchise in the State regardless of whether the franchise offering is exempt from registration under the Maryland Franchise Law.
B. Fraudulent Representations and Deceptive Statements. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise commits a "misrepresentation to, deceit of, or fraud on the buyer" within the meaning of the Maryland Franchise Law, Business Regulation Article, §
									14-221(2), Annotated Code of Maryland, and engages in an "act, practice, or course of business which operates or would operate as a fraud or deceit on another person" within the meaning of the Maryland Franchise Law, Business Regulation Article, §
									14-229(a)(3), Annotated Code of Maryland, if that person makes, or causes to be made, oral or written statements that do not comply with §§C-H of this regulation.
C. Representations Concerning Nature of Franchise. A person authorizing, aiding in, or causing to be made an offer or sale of a franchise may not make, or cause to be made, oral or written statements concerning the:
(1) Exclusivity of the franchise rights granted to the franchisee without disclosing the exact nature of the exclusivity;
(2) Nature and number of locations or sites appropriate for the franchisee's enterprise, whether or not to be obtained by the franchisor, without disclosing:
(a) By whom each site is to be secured;
(b) The manner in which the procurement of any site is to be financed;
(c) The source and terms for financing;
(d) The relationship, if any, between site procurement and the execution of a franchise agreement;
(e) The identity of anyone with whom the franchisor has a binding obligation for the procurement of any site;
(f) Whether use of a site by a franchisee will entitle the franchisee to become affiliated with any existing enterprise; and
(g) Whether the use of a site by a franchisee will create an obligation on the part of the franchisor or franchisee to any third party;
(3) Interest or readiness of other persons to enter into a franchise agreement substantially similar to that being offered or sold without disclosing the source of this information and the identities, including names and addresses, of those persons;
(4) Total number of franchises substantially similar to the franchise being offered or sold that have been established or are planned to be established in a geographical area without disclosing:
(a) Graphically, the area represented; and
(b) Whether the subject franchises are operating or have conducted business within the meaning of Item 20 of the MFOC; or
(5) Endorsement or approval of the franchise or its business by any person or entity without disclosing the nature of the endorsement or approval and any compensation by the franchisor or the franchisees to the person or entity.