Regarding transfers by Stretch Zone, does the Franchise Termination and Release Agreement apply to liability under the Maryland Franchise Registration and Disclosure Law?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Termination and Release Agreement does not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
Source: Item 8 — Receipts. Any sale made must be in compliance with § 683(8) of the Franchise Sale Act (N.Y. Gen. Bus. L. § 680 et seq.), which describes the time period a Franchise Disclosure Document (offering prospectus) must be provided to a prospective franchisee before a sale may be made. New York law requires a franchisor to provide the Franchise Disclosure Document at the earliest of the first personal meeting or ten (10) business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. (FDD pages 99–263)
What This Means (2025 FDD)
According to the 2025 Stretch Zone Franchise Disclosure Document, the Franchise Termination and Release Agreement does not apply to liability under the Maryland Franchise Registration and Disclosure Law in the event of a transfer. This means that even if a franchisee transfers their franchise to another party and signs a Franchise Termination and Release Agreement, they may still be liable under Maryland's franchise laws. This protection extends specifically to liabilities arising from the Maryland Franchise Registration and Disclosure Law. This ensures that franchisees in Maryland retain their rights under state law, regardless of any termination or release agreements related to franchise transfers.
This provision is further reinforced by amendments to other sections of the Franchise Agreement. Specifically, any representations requiring prospective franchisees to assent to a release, estoppel, or waiver of liability will not act as a release, estoppel, or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law. This comprehensive approach ensures that franchisees cannot inadvertently waive their rights under Maryland law through standard agreement clauses.
Additionally, the Stretch Zone agreement specifies that franchisees can bring lawsuits in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law, and these claims can be brought within three years after the franchise grant. This clarification reinforces a franchisee's ability to seek legal recourse in their home state for violations of Maryland franchise law, regardless of conflicting terms in the general franchise agreement. This is particularly important because the agreement also mentions that disputes are resolved through arbitration, but Maryland law considers it unfair to require franchisees to waive their right to file a lawsuit in Maryland for violations of Maryland Franchise Law.