What lawsuit did 360 Painting fail to disclose in its Franchise Disclosure Documents distributed to the Maryland Franchisees?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
In the Consent Order, the Commissioner concluded that defendants had violated §§ 14-214, 14-216, 14- 228 and 14-229 of the Maryland Franchise Registration and Disclosure Law by offering and selling franchises in Maryland and to Maryland residents while not registered to offer and sell franchises in Maryland and using a Franchise Disclosure Document that failed to set forth all information the Securities Division requires to be included in a Maryland registered Franchise Disclosure Document under the Maryland Franchise Registration and Disclosure Law and Maryland's Franchise Regulations. Specifically, the Commissioner found that, in the Franchise Disclosure Documents distributed to the Maryland Franchisees, defendants had failed to disclose the lawsuit filed by Leslie Owens Brown referenced above in Item 3. 360 Painting has corrected this error. The two Maryland Franchisees accepted the rescission offer.
Source: Item 3 — LITIGATION (FDD pages 13–18)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the Securities Commissioner found that 360 Painting failed to disclose a specific lawsuit in the Franchise Disclosure Documents (FDDs) distributed to Maryland franchisees. The lawsuit that 360 Painting failed to disclose was filed by Leslie Owens Brown. This failure to disclose the lawsuit was a violation of Maryland Franchise Registration and Disclosure Law. 360 Painting has since corrected this error.
This type of omission is a serious issue, as the FDD is meant to provide potential franchisees with all the information necessary to make an informed investment decision. Lawsuits, especially those involving the franchisor, can have a material impact on the value and viability of a franchise.
It is important to note that the two Maryland franchisees who received the defective FDD were offered rescission, which they accepted. This means they were able to terminate their franchise agreements and receive a refund of their initial franchise fees. This highlights the importance of thorough due diligence and the potential legal recourse available to franchisees when franchisors fail to meet their disclosure obligations.