The following is a detailed summary of all current legislative activity impacting franchising that the AAFD has been actively involved in to date, highlighting key initiatives and efforts undertaken to support and advocate for our community’s interests.

Federal Legislation

• Private Right of Action of FTC Franchise Rule Violation – This was H.R.10311 in the last House session and will be reintroduced in this session. This bill gives franchisees the right to sue the franchisor for violations of the FTC Franchise Rule, basically, disclosure violations, In addition to “actual damages” which are usually only the amounts paid directly to the franchisor, the bill also would allow the franchisee to seek “additional equitable relief”, including rescission and recovery of things like the cost of the lease or loan obligations. We will be reaching out to franchisees to engage with their House of Representative’s member. Please respond to any request. Your engagement is critical.

State Legislation

• Maryland – HB0992 (updates to existing law in bold), Introduced by Delegate Korman – This bill was introduced without our knowledge. The changes to Maryland law are in bold.
  • Section 14-214 (E) adjusts for inflation the amount needed to qualify for a registration exemption and is not a concern to us.
  • Section 14-227 (A), is likely the crux of the bill and we should oppose to it. The updates to this section would restrict the rights of franchisees outside of Maryland to sue a franchisor based in Maryland using the state’s disclosure law. Maryland considers a franchisor based in the state to have made the offer of the franchise to have occurred in the state. This language may also preclude a franchisee from using the disclosure laws in the state they are located. We oppose this bill unless this section is removed. It is a hard NO with this.
  • Section 14-227 (F) – The statute of limitations language is not a problem for us. A 5-year statute of limitations is what many states and the FTC already use.
  • Section 14-233 relates to freedom of association, and we support this language.
  • Section 14-219.1 relates to a pilot program for registration in the state. We have talked to the Attorney General’s office, and they support this with some minor changes. The goal of this is to spread out the workload for the AG’s office instead of all the FDD’s coming to them at once. This would allow franchisors to submit their FDD’s minus their audited financials early, then submit the financials by the deadline with a few updates required in Item 8.

AAFD’s position on this legislation is that in its current form we are in opposition. We will support with the elimination of the updates to Section 14-227 and modifications to Section 14-219.1 as requested by the Attorney General’s office. 

For Maryland franchisees, you will be contacted to engage on this.

• New Mexico – SB-439, Introduced by Senator Joshua A. Sanchez. Currently, there is no franchise law in New Mexico. This bill is using Indiana’s Deceptive Franchise Practices Act.
• Section 2 lists the unlawful provisions to be contained in a franchise agreement
  • Certain limitations on supply chain
  • Territorial rights
  • Substantial modification of the franchise agreement without franchisee’s consent
  • Allowing rebates unless they are accounted for and transmitted to the franchisee
  • Requiring the franchisee to prospectively assent to a release
  • Allowing for an increase in prices of goods and services after they have been ordered
  • Termination without good cause
  • Permitting the franchisor to fail to renew without good cause or bad faith
  • Requiring a noncompete of longer than 2 years
  • Limiting litigation for breach of the agreement
  • Requiring a franchisee to participate in certain advertising campaigns and promotions
    • Section 4 lists the unlawful acts and practices
      • Coercing a franchisee to:
        • Order or accepts delivery of goods and services that aren’t necessary for the operation of the franchise, required by the franchise agreement, required by law, or voluntarily ordered by the franchisee
        • Participate in certain advertising campaigns
        • Enter into an agreement with the franchisor by threatening to cancel or renew any agreement with the franchisor
      • Refusing or failing to deliver goods and services after receipt of an order from the franchisee
      • Denying a surviving spouse, heirs or estate the opportunity to participate in the ownership of the franchise
      • Establishing a franchisor-owned outlet withing the exclusive territory
      • Discriminating unfairly among its franchisees
      • Receive rebates unless they are promptly accounted for and transmitted to the franchisee
      • Increase the price of goods and services provided by the franchisor after n order has been placed
      • Using deceptive advertising
    • Section 5 requires at least 90-day notice on non-renewal
    • Section 7 gives 5-year statute of limitations

AAFD is supporting this legislation. 

For New Mexico franchisees, we will be reaching out for you to engage on this.

• Virginia SB798, introduced by Senator Head, who is an ex Home Instead franchisee. This bill would have banned noncompete clauses in franchise agreements and required franchises in Virginia to be under Virginia franchise law. This bill had passed the Senate 40-0 but was killed in committee in the House. It’s a real head scratcher as it was the DEMs that killed the bill. DEMs universally support the banning of non-competes. This seems a case of not wanting to vote for a bill that was introduced by the other party, in this case a REP Senator.
  • Oregon had 3 bills, all introduced by Representative Hudson. Unfortunately, all 3 will not be moving forward due to lack of support.

AAFD supported this legislation.

• HB 2572 – would limit the hours franchisors could require franchisees to be open if unprofitable or not safe. It would have had to exempt the lodging industry.
• HB 2584 – would have prohibited franchisors charging fees that were not disclosed. This would have codified into Oregon law what the FTC has stated on July 12, 2024.
• HB 2590 – would have limited supply chain requirements and require rebates be accounted for and transmitted to the franchisee.

AAFD supported all 3 bills.

If you have any questions about these legislations, or if you are a franchisee located in Maryland or New Mexico, we’d love to hear from you. 
Please feel free to reach out.