Franchise Registrations in Maryland Show Slight Uptick in 2010
The economic problems in our economy over the past three years have had a direct impact on franchising. Existing franchised business have taken a hit, of course, and the measures of franchise expansion have also shown the deep effect of the credit crisis. My home state of Maryland is one measure of that. Maryland, of course, is one of the dozen or so states that require franchisors to register before offering franchises here.
This morning, the top franchise regulator in the state, Dale Cantone, reported to our state bar franchise committee a few performance measures that were eye-catching. The year 2008, he noted, was the first year on record in which the number of overall franchise filings decreased from the prior year. And 2009 was off even more, a 27% decrease from the peak year of 2007. How about 2010? The numbers just came in, he said. While there was still a numeric decrease in the number of initial filings (by franchisors who have not been registered in Maryland before), there was a “modest increase” in the number of overall filings from 2009.
Might this be a hint of recovery in the franchise sphere?
Hard to say. Like the rest of the economy, if it means what we all hope it means, it indicates an extremely slooooow recovery.
A couple other interesting tidbits: The national organization of the regulators of franchising (the North American Securities Administrators Association, or NASAA) is thinking about developing a system of electronic document filing that could be used by all of the registration states, and could streamline the admittedly cumbersome state registration process. Great strides have been taken in the past three years towards electronic disclosure, but the idea of using an electronic database tool that franchisors and regulators alike could employ to communicate (and save a few trees), is well worth developing. It really is the future of our business.
We have also heard that many of the franchise registration states are responding to the budget squeeze by employing state-wide government furlough days, hiring freezes, and other belt tightening measures, although the deadlines imposed by statute or regulation are not changing. California is leading the way in this regard. The franchise community should brace for continuing problems of registration states responding to filings in a reasonable time frame.
Andrew Caffey is one of the nation’s leading franchise legal specialists and he represents franchisors across the United States. Caffey served as General Counsel of the International Franchise Association, a member of the Governing Committee of the ABA Forum on Franchising, and Chair of the ABA Forum on Franchising. He also is a member of the bar in Maryland and the District of Columbia, and a member of the Panel of Neutrals of the American Arbitration Association. Caffey has appeared on numerous franchise programs and is a frequent speaker and author on subjects of franchise and business opportunity regulation.
