To what extent are transfer fees collectable by 360 Painting?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
ADDENDUM TO 360 PAINTING, LLC FRANCHISE DISCLOSURE DOCUMENT FOR MARYLAND FRANCHISEES
Item 5, Additional Disclosure:
Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement.
Item 17, Additional Disclosures:
Our termination of the Franchise Agreement because of your bankruptcy may not be enforceable under applicable federal law (11 U.S.C.A. 101 et seq.).
You may bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law.
Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
The general release required as a condition of renewal, sale and/or assignment/transfer will not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
Additional Disclosures:
No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
AMENDMENT TO 360 PAINTING, LLC FRANCHISE AGREEMENT FOR THE STATE OF MARYLAND
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 42–46)
What This Means (2025 FDD)
The 2025 Franchise Disclosure Document for 360 Painting includes state-specific addenda that modify the standard franchise agreement to comply with local laws. For instance, in Maryland, all initial fees and payments are deferred until 360 Painting completes its pre-opening obligations. Similarly, Minnesota defers all initial fees and payments until pre-opening obligations are met and the business is opened. These addenda highlight that the collection of initial fees, including potential transfer fees, is subject to state regulations and the fulfillment of 360 Painting's obligations.
The addenda also address franchisees' rights and protections under state laws. In Maryland, the general release required for renewal, sale, or transfer does not apply to liabilities under the Maryland Franchise Registration and Disclosure Law. Additionally, no statement signed by a franchisee can waive claims under state franchise law or disclaim reliance on franchisor statements. Minnesota law prohibits requiring litigation outside of Minnesota, waiving jury trials, or consenting to liquidated damages or termination penalties. These provisions ensure that franchisees retain their legal rights and protections, regardless of the franchise agreement's standard terms.
For prospective 360 Painting franchisees, these state-specific modifications are crucial. They dictate when initial fees are due, protect franchisees' legal rights, and ensure compliance with local regulations. Franchisees should carefully review the addendum for their specific state to understand how the standard franchise agreement is modified. This review will help them understand their obligations and rights regarding fee payments, dispute resolution, and termination or transfer conditions.
The FDD also emphasizes the importance of the Disclosure Document itself. It states that 360 Painting must provide the disclosure document 14 days before signing any binding agreement or making any payment related to the franchise sale. States like New York, Iowa, and Michigan have similar requirements, ensuring franchisees have adequate time to review the document and seek legal counsel. Failure to deliver the disclosure document on time or if it contains false or misleading information may result in violations of federal and state law.
In summary, the collectability and conditions surrounding transfer fees for a 360 Painting franchise are significantly influenced by state-specific regulations. Prospective franchisees must carefully examine the relevant state addenda within the FDD to fully understand their rights, obligations, and the timing of fee payments. This thorough review is essential for making an informed decision and ensuring compliance with all applicable laws.