What Maryland law is the Ella Cafe Franchise Agreement amendment intended to comply with?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
- In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law, Md. Code Ann., Bus. Reg. §§14-201-14-233, the Franchise Agreement is amended as follows:
Sections 3.2 and 15.2 require Franchisee to sign a general release as a condition of renewal or transfer of the Franchise, such release shall exclude claims arising under the Maryland Franchise Registration and Disclosure Law.
Section 17.1 requires that the Franchise be governed by the laws of the State of Florida however, in the event of a conflict of laws to the extent required by the Maryland Franchise Registration and Disclosure Law, the laws of the State of Maryland shall prevail.
Sections 17.2 and 17.3 requires litigation to be conducted in the State of Florida; the requirement shall not limit any rights Franchisee may have under the Maryland Franchise Registration and Disclosure Law to bring suit in the State of Maryland.
Any Section of the Franchise Agreement requiring Franchisee to assent to any release, estoppel or waiver of liability as a condition of purchasing the Franchise are not intended to, nor shall they act as a, release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
The Franchise Agreement is amended to the extent that any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within three years after the grant of the Franchise.
- Section 3.1 of the Franchise Agreement is amended to reflect the following:
"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" ("Fee Deferral Requirement"). Therefore, notwithstanding anything to the contrary in this Section 3.1 of the Franchise Agreement, payment of the initial franchise fee and the preopening initial inventory and equipment package fee are due immediately at such time as when Franchisor has met its pre-opening obligations to Franchisee, and Franchisee has commenced operation of the Franchised Business.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the Franchise Agreement amendment is intended to comply with the Maryland Franchise Registration and Disclosure Law, Md. Code Ann., Bus. Reg. §§14-201-14-233. This law necessitates several amendments to the standard franchise agreement for franchisees operating in Maryland.
Specifically, the amendment ensures that any requirement for franchisees to sign a general release as a condition of renewal or transfer excludes claims arising under the Maryland Franchise Registration and Disclosure Law. It also stipulates that while the Franchise Agreement is generally governed by Florida law, the laws of Maryland will prevail in the event of a conflict, as required by the Maryland Franchise Registration and Disclosure Law. Furthermore, the amendment clarifies that any requirement for litigation to be conducted in Florida does not limit a franchisee's right to bring suit in Maryland under the Maryland Franchise Registration and Disclosure Law.
Additional protections under the Maryland Franchise Registration and Disclosure Law include that franchisees must bring claims within three years after the grant of the franchise. The Maryland Securities Commissioner also requires a financial assurance based on Ella Cafe's financial condition, leading to a Fee Deferral Requirement where initial fees and payments are deferred until Ella Cafe completes its pre-opening obligations and the franchisee commences operation.