Lusthaus Law regularly shares news and legal updates that could impact franchising at state, national, and industry levels. This year has already proven to be pivotal, highlighted by new rules that govern and improve franchising. Let’s review some recent updates that could impact franchisors, franchisees and multi-unit operators.
XPotential Settlement Demonstrates That Federal Franchise Enforcement Is Back
Franchisors have historically viewed state regulators as their primary compliance concern, since the Federal Trade Commission (FTC) has not been perceived as a dominant enforcer. But the FTC’s $17 million settlement with Xponential Fitness in March may have changed that perception.
Xponential is a health and wellness system operating in 49 states that boasts a portfolio of brands like StretchLabs, Club Pilates and Pure Barre. The FTC alleged Xponential violated the FTC Franchise Rule by failing to provide prospective franchisees with complete and accurate disclosures, including information related to franchise turnover, executive histories, studio opening timelines, and the timely delivery of Franchise Disclosure Documents (FDDs). The $17 million settlement is believed to be the largest of its kind enforced by the FTC, as the resolution includes franchisee redress, underscoring the seriousness with which regulators are approaching franchise sales practices.
For years, regulators have expressed concerns that franchisors were making aggressive sales representations that were not always reflected in their FDDs, and this case shows that the FTC can be an advocate for franchisees
Franchisors should take this opportunity to revisit their compliance programs with their franchise lawyers ahead of the annual FDD update. For example, franchisors should carefully review Item 19 (financial performance representations), Item 20 (turnover disclosures), executive disclosures, FDD delivery procedures, sales scripts, marketing materials, and training programs.
As previously discussed, the fitness industry offers tremendous earnings opportunities. While the facts surrounding Xponential are unique, franchisors should not treat this as an isolated incident in the fitness industry. Instead, as the FTC statement about the Xponential settlement notes, franchisors should view this development as a broader warning that federal franchise enforcement is back in a meaningful way.
Maryland’s Franchise Reform Act Is Here To Stay
Maryland Governor Wes Moore signed the Franchise Reform Act (House Bill 730 / Senate Bill 415) into law on May 12, 2026, marking the most significant update to Maryland’s franchise laws in decades. The legislation renews Maryland’s Franchise Fast Track Pilot Program, which was launched in October 2025, to streamline registrations by balancing franchisor streamlining with stronger franchisee rights. The law will take effect Oct. 1, 2026.
The reform is designed to speed up registration review, reduce administrative friction, and make Maryland a more predictable market for expansion, while preserving the state’s disclosure and anti-fraud protections.
For franchisors, the biggest practical effect is timing. Faster review can shorten the path from filing to launch, but only for systems that are organized, current, and ready to respond quickly to regulators’ comments. That makes calendar discipline, document consistency, and financial statement readiness more important than ever. The law has the support of the International Franchise Association, which lauded the law’s ability to improve efficiency without lowering the compliance bar.
The law also reinforces that Maryland remains a registration state. Brands that want to sell or offer franchises in Maryland or to Maryland residents should still approach the FDD process seriously, especially regarding state-specific disclosure requirements and renewal planning.
Virginia’s Retail Franchising Act and Maryland’s new legislation may indicate a regional shift in franchise regulation. Both move toward active regulation of the franchisor‑franchisee relationship: Virginia by imposing rules on substantive contract terms, and Maryland by updating disclosure and registration procedures. Together, they demonstrate how states are becoming proactive franchise policymakers rather than just registration authorities.
Expanding franchisors can build Maryland into their annual compliance cycle instead of considering The Old Line State as an afterthought. Routine filing through NASAA Franchise Electronic Filing Depository (FRED) can help reduce delays, improve renewal readiness, and support smoother market entry when opportunities arise.
NY Trade Shows: Know Before You Go
The New York Department of Law weighed in on what franchisors can and cannot do ahead of the International Franchise Expo (IFE), which was held at the Javits Center in late May 2026. The temporary franchise expo exemption reinforces a narrow, but important, compliance pathway for unregistered franchisors.
While the exemption allows brands to exhibit at events like the IFE, it draws a firm line:
- No distribution of FDDs,
- No offers, and
- No sales activity within New York.
In practice, this limits exhibitors to brand promotion and lead generation, requiring careful training of sales teams to avoid inadvertently triggering registration violations.
Trade shows remain valuable for visibility and pipeline development, but New York’s regulations demand franchisors take a disciplined, jurisdiction-specific approach to presale communications. Casual conversations can quickly cross into “offers” under franchise law, particularly where investment ranges, territory discussions, or timelines are addressed.
Given that similar guidance is expected for future expos, franchisors should treat the exemption as a temporary accommodation and not a substitute for registration. The practical takeaway is straightforward and similar to the approach to expanding in Maryland: incorporate routine filing through the NASAA FRED system into annual compliance calendars. This will allow full participation in key markets like New York, and also reduce the risk of missteps during major recruiting events.
News, appointments, and state and federal laws are announced at a rapid pace. That is why franchisors and franchisees should collaborate with a qualified franchise lawyer to perform legal audits of their enterprises and review compliance with existing and forthcoming laws.
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