On April 13, 2026, Virginia Governor Abigail Spanberger signed HB 69/SB 240 into law, which amends the Virginia Retail Franchising Act (the “Act”). This law bans the offer or sale of a franchise in Virginia containing a post-term non-compete provision, effective July 1, 2026. Existing franchise agreements and those entered into on or before June 30, 2026, are not affected by the new law. In addition, any franchise agreement offered or entered into pursuant to the Act will be governed by the Virginia law.
Background
Beginning July 1, franchisors will no longer be able to offer or sell franchises in Virginia that include a post‑term non‑compete provision. The statute provides that it shall be 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 law contains a carveout for situations in which the franchisee sells the franchise voluntarily at a mutually agreed price, either to a third party or to the franchisor. Such sales may include a term restricting the right of the seller-franchisee to engage in the business of offering, selling or distributing goods or services at retail for a period not to exceed two years after the sale.
What This May Mean for You
The International Franchise Association (IFA) is planning to host 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, as well as the practical impact to franchisors and franchisees. The IFA will send a registration link for the member briefing later this week.
While the new law is not retroactive and does not affect franchise agreements signed before July 1, the Virginia State Corporation Commission’s Division of Securities and Retail Franchising (the “Division”) notified the franchise community yesterday that: on or after July 1, 2026, all franchisors offering or selling franchises in Virginia must include language addressing these legislative changes in their respective franchise disclosure document (FDD). The Division provided specific language addressing these legislative changes – acknowledging that some franchises have been registered or renewed before the July 1 deadline and will expire after that deadline, and stating that these franchisors have two options:
Option 1: If they do not plan to sell a franchise in Virginia on or after July 1, 2026, they do not need to update their FDD at this time. The required language can be added upon renewal.
Option 2: If they may or will sell a franchise in Virginia on or after July 1, 2026, they must submit an amendment application adding the required language, and use that updated FDD for all Virginia prospective franchisees starting July 1, 2026.
Franchisors planning to file their renewal applications in the coming weeks may consider adding the specific language to their FDDs at renewal but indicate that it only applies to franchise agreements entered into after June 30, 2026.
Franchise legal counsel can help franchisors navigate the nuances of the law by preparing, updating, and submitting the FDDs, franchise agreements, and state-specific addenda to ensure compliance with the new Virginia law.
We will continue to monitor updates from the IFA and the State Corporation Commission’s Division of Securities and Retail Franchising regarding the new law. If you have any questions, please reach out to Michael Sturm, Liz Dillon or Asad Imam, or your regular Lathrop GPM attorney.