Did the two Maryland Franchisees accept 360 Painting's rescission offer?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
On August 18, 2016, the defendants entered into a Consent Order with the Securities Commissioner, in which they agreed, without admitting or denying any of the Commissioner's statements of fact or conclusions of law, except as to the Commissioner's jurisdiction in the proceeding, (1) to immediately and permanently cease and desist from the offer and sale of franchises in violation of the Maryland Franchise Registration and Disclosure Law; (2) to promptly file with the Securities Division and diligently pursue the completion of an initial application to register the 360 Painting franchise offering in Maryland; and (3) to send offers of rescission to two Maryland Franchisees, offering them the right to rescission of their 360 Painting franchise agreements and to obtain a refund of initial franchise fees. In an Order Modifying Consent Order dated January 4, 2017, the Consent Order was modified so that 360 Painting was not required to register its 360 Painting franchise offering in Maryland as long as no offers or sales of 360 Painting franchises were made in Maryland or to any Maryland residents. 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 the 2025 360 Painting Franchise Disclosure Document, two Maryland franchisees accepted the rescission offer from 360 Painting. This offer was a result of a Consent Order issued by the Securities Commissioner of Maryland. The order was put in place after an investigation into 360 Painting's franchise-related activities.
The Consent Order required 360 Painting to offer these franchisees the right to rescind their franchise agreements and receive a refund of their initial franchise fees. The Commissioner concluded that 360 Painting had violated Maryland franchise laws by offering and selling franchises in Maryland without proper registration and by using a Franchise Disclosure Document that did not include all required information. Specifically, the FDDs distributed to the Maryland franchisees failed to disclose a lawsuit filed by Leslie Owens Brown.
This situation highlights the importance of franchisors complying with state franchise laws and providing accurate and complete information in their Franchise Disclosure Documents. For prospective franchisees, it demonstrates the potential for regulatory action and the possibility of rescission offers if a franchisor fails to meet these obligations. It also underscores the need for franchisees to carefully review the FDD and seek legal counsel to understand their rights and protections under state law.