This week, Virginia Governor Abigail Spanberger signed HB 69/SB 240 into law which amends the Virginia Retail Franchising Act. Effective as of July 1, 2026, it is unlawful for any person to enter into or offer a franchise in Virginia that restricts the right of a franchisee to engage in the business of offering, selling or distributing goods or services at retail after termination or expiration of the franchise agreement. The new law does contain a carve out for instances where a franchisee voluntarily sells its franchise business at a mutually agreed price to a third party or to the franchisor provided that any post-term non-compete not exceed two years after the sale.
While this law is not being applied retroactively, meaning any existing franchise agreements and any new agreements entered into on or before June 30, 2026 that have post-term noncompete provisions will continue to be enforceable in Virginia (to the extent such provision protects a legitimate business interest, is reasonable in scope, duration and geography and is not unduly burdensome), this new law is very concerning and troublesome for franchisors and their ability to protect their brand equity and market share in Virginia and further questions the sustainability of franchise systems in Virginia. Franchisors in Virginia will now be forced to rely more heavily on and ensuring that their franchise agreements have robust confidentiality clauses, non-solicitation provisions preventing former franchisees from actively soliciting the brand’s customers and aggressive de-branding and/or de-identification requirements so as to prevent customer confusion upon termination or expiration of the franchise agreement. If a former franchisee continues to operate a similar business, the franchisor will need to be vigilant about any visual cues that suggest a continued affiliation of the brand and/or continued use of confidential and/or proprietary information and materials of the brand.
If you are a franchisor and you have already filed your 2026 Franchise Disclosure Document in Virginia and intend to sell franchises in Virginia on or after July 1, 2026, you will need to amend your FDD filing in Virginia to include the required language and use that amended FDD for all Virginia prospective franchisees starting July 1, 2026. If you have not yet filed your 2026 FDD in Virginia, you should make sure that you add the required language prior to your initial submission. Note, you may indicate that this waiver of post-term noncompete compliance only applies to franchise agreements signed after June 30, 2026.
The International Franchise Association (IFA) is hosting a member briefing webinar on April 29 at 2 p.m. ET on the new law and what it means for franchise registrations in Virginia.
