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Earlier this month, the State of Virginia amended the Virginia Retail Franchising Act in two ways: (1) Virginia law governs all Virginia franchise agreements; and (2) offering or selling a franchise agreement with post-termination non-competition provisions in the franchise agreement is unlawful after June 30, 2026.

The Virginia Retail Franchising Act applies to any written franchise agreement that contemplates or requires the franchisee to establish or maintain a place of business within the Commonwealth of Virginia. VA Code §13.1-559(B). The types of transactions affected by the post-termination non-competition amendment are the offer and sale of franchises, to include, “every attempt to offer to dispose of or grant, and every solicitation of an offer to buy, a franchise or an interest in a franchise for value,” and “every contract or agreement of sale or grant of, contract to sell, or disposition of a franchise or interest in a franchise for value.” VA Code §13.1-559(A). This means the amended law applies to all franchises set to be operated in the Commonwealth of Virginia.

Virginia Law to Govern

Beginning July 1, 2026, any franchise agreement subject to the Virginia Retail Franchising Act must be governed by the laws of Virginia. A choice-of-law provision designating a state’s law other than Virginia’s in the franchise agreement or related agreement will no longer apply to franchises operated in Virginia.

Ban on Post-Termination Non-Competition Provisions

Beginning July 1, 2026, the offer or sale of any franchise agreement to a franchisee set to operate in Virginia that restricts the right of a franchisee to engage in the business of offering, selling, or distributing similar goods or services at retail after termination or expiration of the franchise agreement is unlawful.

The new law expressly provides that it does not alter, modify, or impair contracts entered into, extended, or modified before the July 1 deadline. Meaning, franchise agreements signed, modified, or extended by June 30, 2026, will not be affected by the non-competition ban.

In practical terms, this means franchisors cannot prevent a franchisee operating or planning to operate its franchise location in Virginia from operating a competing business after the franchise relationship ends.

What Changes Are Coming

In conjunction with the new law, the Virginia State Corporation Commission’s Division of Securities and Retail Franchising (the “Division”) prescribed language addressing the legislative changes above for all franchisors offering or selling franchises in Virginia.

Starting July 1, 2026, the following language must appear in the Virginia Addendum to the Franchise Agreement:

Under subsection D of § 13.1-559 of the Virginia Retail Franchising Act, for all franchises located in Virginia, the franchise contract or agreement offered or entered into pursuant to terms of this chapter shall be governed by the laws of the Commonwealth of Virginia.

Under subdivision A 4 of § 13.1-563 of the Virginia Retail Franchising Act (“Act”), it is unlawful to offer or enter into a franchise agreement 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.  However, subsection B of § 13.1-563 of the Act provides that if a franchisee sells a franchise at a mutually agreed upon price to a third party or back to the franchisor, such sale may include a term restricting the right of such franchisee to engage in the business of offering, selling, or distributing goods or services at retail for a period of no more than two years after such sale.

What Action Do You Need to Take?

Franchisors that do not plan to sell a franchise in Virginia before their current registration expires (if expiration occurs after June 30, 2026) can defer making the required amendments until their Virginia renewal, at which time, they will be required to incorporate the necessary changes.

Franchisors that anticipate selling a franchise in Virginia on or after July 1, 2026, must submit to the Division an amended application before selling and must include the necessary language in their updated FDD.

We are prepared to help you through the legislative changes and necessary edits to your franchise documents and answer any questions you have regarding the changes to the Virginia Retail Franchising Act. If you have further questions, contact one of our business attorneys at Fahey Schultz Burzych Rhodes PLC.