What are the implications of the Maryland Securities Commissioner's findings regarding The C12 Group, LLC, as described in Item 3, for a prospective franchisee's due diligence process?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
In the Matter of The C12 Group, LLC, Administrative Proceeding Before the Securities Commissioner of Maryland, Case No. 2011-0530. In responding to inquiries from the Maryland Securities Division as a result of an investigation into the franchise related activities of The C12 Group, LLC ("C12"), the Maryland Securities Commissioner ("Commissioner") concluded that grounds exist to allege that C12 violated the registration, disclosure and antifraud provisions of the Maryland Franchise Law and an Escrow Order of the Commissioner, in relation to the offer and sale of a C12 franchise. C12 disclosed that it sold a franchise in Maryland during a time it was not registered to offer and sell franchises in Maryland and that it did not deposit any initial fees paid by the franchisee into escrow account as required pursuant to a 2009 Escrow Order of the Commissioner. On May 15, 2012, the Commissioner and C12 agreed to enter into a consent order whereby C12, without admitting or denying any violations of law, agreed to: immediately and permanently cease from the offer and sale of franchises in violation of the Maryland Franchise Law; promptly file and diligently pursue an application for franchise registration in Maryland; and offer rescission to the franchisee who was sold a franchise in Maryland in violation of the Maryland Franchise Law.
What This Means (2025 FDD)
According to the 2025 FDD, Item 3 discloses an administrative proceeding involving The C12 Group, LLC and the Maryland Securities Commissioner. The Commissioner found grounds to allege that C12 Group violated Maryland franchise law regarding registration, disclosure, and antifraud provisions, as well as a 2009 Escrow Order. Specifically, C12 Group allegedly sold a franchise in Maryland without proper registration and failed to deposit the initial franchise fee into an escrow account as required. This is a significant finding that prospective franchisees should carefully consider.
On May 15, 2012, C12 Group and the Commissioner entered into a consent order. While C12 Group did not admit or deny any violations, they agreed to cease offering or selling franchises in Maryland in violation of the Maryland Franchise Law, pursue franchise registration in Maryland, and offer rescission to the franchisee who was sold the franchise in violation of the law. This consent order indicates that C12 Group took steps to rectify the situation and come into compliance with Maryland franchise law.
For a prospective franchisee, this information highlights the importance of verifying that C12 Group is in full compliance with all applicable state franchise laws, including registration and escrow requirements, before investing in a franchise. It also demonstrates the potential for regulatory scrutiny and the possible consequences of non-compliance. While the matter was resolved through a consent order, it underscores the need for thorough due diligence, including consulting with a franchise attorney, to assess the risks and ensure that C12 Group is operating legally and ethically.