Md. Code Regs. 02.02.08.02

Current through Register Vol. 51, No. 22, November 1, 2024

Section 02.02.08.02 - Franchise

A. Scope. The Commissioner shall consider the factors set forth in this regulation in any determination as to whether a business relationship is a franchise as defined in the Maryland Franchise Law, Business Regulation Article, §14-201(e), Annotated Code of Maryland.

B. Marketing Plan. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1), Annotated Code of Maryland, "marketing plan" means a plan or system concerning a material aspect of conducting business. Indicia of a marketing plan include:

(1) Price specification, special pricing systems, or discount plans;

(2) Sales or display equipment or merchandising devices;

(3) Sales techniques;

(4) Promotional or advertising materials or cooperative advertising;

(5) Training regarding the promotion, operation, or management of the business; and

(6) Operational, managerial, technical, or financial guidelines or assistance.

C. Prescription by Franchisor. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1)(i), Annotated Code of Maryland, whether a marketing plan or system is "prescribed in substantial part by the franchisor" depends upon consideration of a number of factors including, but not limited to:

(1) Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee operate a business that purchases a substantial portion of its goods solely from sources designated or approved by the franchisor;

(2) Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee follow an operating plan, standard procedure, or training manual, or its substantial equivalent, promulgated by the franchisor in the operation of the licensed business, violations of which may, under the terms of the agreement, permit the franchisor to terminate the agreement;

(3) Whether the representations made by the franchisor in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer to sell or sale of a franchise requires, that the franchisee is limited as to the:

(a) Type, quantity, or quality of any product or service the franchisee may sell; or

(b) Persons or accounts to which the franchisee may sell the franchisor's product or service;

(4) Whether the provisions of the agreement permitting the franchisor to terminate the agreement, to buy back the franchisee or license rights assigned by the agreement, or to refuse to renew the grant of the franchisee or license rights are such as to operate or be exercisable substantially at the will of the franchisor; and

(5) Whether the representations made by the franchisor or seller in connection with the offer or sale of a franchise suggest, or any agreement executed in connection with the offer or sale of a franchise requires, that the franchisor aid or assist the franchisee in:

(a) Training,

(b) Obtaining locations or facilities for operation of the franchisee's business, or

(c) Marketing the franchisor's product or service.

D. Association with Franchisor's Business. For purposes of the Maryland Franchise Law, Business Regulation Article, §14-201(e)(1)(ii), Annotated Code of Maryland, whether a marketing plan or system is "associated substantially with the trademark, service mark, trade name, logotype, advertising, or other commercial symbol that designates the franchisor or its affiliate" depends upon consideration of a number of factors, including but not limited to:

(1) Whether the identification of the franchisor's business or use of its trademark, service mark, trade name, logotype, advertising, or other commercial symbol is used either by the franchisor or the franchisee to enhance the chances of the franchisee's success in the business of dealing in, selling, or promoting the franchisor's product or service; and

(2) Whether the agreement provides for the franchisee to contribute a portion of its operating revenue to the franchisor for advertising expenses, or representations made by the franchisor or the franchisor's agents or employees otherwise suggest, require, or compel payment by the franchisee for advertising conducted, managed, or prescribed by the franchisor.

E. The Commissioner may consider, in determining whether a business relationship is a franchise as defined in Maryland Franchise Law, Business Regulation Article, §14-201, Annotated Code of Maryland, whether the relationship is described as or entitled a "franchise".

Md. Code Regs. 02.02.08.02

Regulations .02 adopted as an emergency provision effective December 2, 1977 (4:26 Md. R. 2005); emergency status extended at 5:8 Md. R. 587
Regulations .02 adopted effective May 5, 1978 (5:9 Md. R. 683) (Recodified from COMAR 02.02.04 to 02.02.10)
Regulations .02 recodified and amended effective May 19, 1986 (13:10 Md. R. 1154)
Regulation .02C amended effective October 29, 1990 (17:21 Md. R. 2525)
Regulations ______ .02 under COMAR 02.02.10 repealed effective January 17, 1994 (21:1 Md. R. 27)
Regulations .02 adopted effective January 17, 1994 (21:1 Md. R. 27)