On April 13, 2026, Virginia Governor Abigail Spanberger signed HB 69/SB 240 into law, amending the Virginia Retail Franchising Act (the “Act”). The legislation introduces a prohibition on post-term non-compete provisions in franchise agreements offered in Virginia as well as requiring any franchise agreement offered or entered into be governed by Virginia law , effective July 1, 2026.
While the law represents a meaningful shift in Virginia franchise regulation, it is expressly prospective in application. Franchise agreements entered into on or before June 30, 2026, remain unaffected.
Key Provisions of the New Law
Beginning July 1, 2026, franchisors may no longer offer or sell a franchise in Virginia if the agreement includes a provision restricting a franchisee’s ability to engage in a competing business following termination or expiration of the franchise relationship.
Specifically, the new law makes it unlawful to restrict 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.
Further, this new law requires that any franchise agreement entered into in Virginia must be governed by laws of the Commonwealth of Virginia.
Limited Carveout for Sale Transactions
The law includes a narrow exception in connection with the voluntary sale of a franchise. Where a franchisee sells its business—either to a third party or to the franchisor—for a mutually agreed-upon price, the parties may agree to a non-compete restriction not to exceed two (2) years following the sale. This must be included in the agreement entered into at the time of sale.
Impact on Franchise Disclosure Documents and Registration
The Virginia State Corporation Commission, through its Division of Securities and Retail Franchising, has issued guidance regarding compliance with the new law.
Effective July 1, 2026, franchisors offering or selling franchises in Virginia must include specific disclosure language in their Franchise Disclosure Documents (“FDDs”) addressing the statutory changes.
Critical Timing Considerations for 2026 FDDs
Franchisors preparing their 2026 FDDs should give particular attention to the treatment of post-term non-compete provisions as they relate to Virginia.
At a minimum, franchisors should either include Virginia-specific language in the 2026 FDD expressly removing or modifying post-term non-compete obligations for agreements entered into on or after July 1, 2026, or be prepared to promptly file a post-effective amendment by July 1, 2026.
Failure to take one of these approaches may result in an inability to lawfully offer or sell franchises in Virginia after July 1, 2026.
Enforcement Considerations and Anticipated Disputes
Although the statute is explicitly non-retroactive, franchisors should anticipate aggressive franchisee counsel may attempt to argue that prior non-compete provisions are no longer enforceable based on public policy considerations, despite clear statutory language to the contrary.
Conclusion
Virginia’s enactment represents a significant shift in franchise regulation. Franchisors must act promptly to ensure compliance for offerings beginning July 1, 2026 and proactively address both disclosure and contractual implications in their 2026 FDDs.
