On April 14, 2026, the Virginia State Corporation Commission’s Division of Securities and Retail Franchising announced the legislative amendments to the Virginia Retail Franchising Act that will take effect on July 1, 2026.
At first glance, the changes appear narrow, but from a practical and legal standpoint, they carry meaningful implications for franchisors, franchisees and multi-unit operators doing business (or planning to operate) in Virginia.
This news was too urgent to hold for our Q2 legislative round-up, so let’s discuss this development and what you should be doing about it now if your franchise operates in Virginia.
Virginia Law Will Now Govern Virginia Franchise Agreements
The first major change is the addition of § 13.1-559(D), which provides that any franchise agreement “offered or entered into” under the Act “shall be governed by the laws of the Commonwealth.”
For franchisors, this is not just a technical clarification. It is a mandate.
Many franchise systems currently rely on out-of-state governing law provisions (often tied to headquarters location). As of July 1, that approach will no longer be viable for Virginia franchises governed by the Act.
Why this matters:
- Choice-of-law provisions will need to be revised for Virginia deals
- Existing template agreements may become non-compliant if used without modification
- Dispute strategy will shift, particularly where franchisors previously relied on more favorable jurisdictions
For franchisees and multi-unit operators, this change is more balanced. It effectively ensures that Virginia-based franchise relationships are interpreted under Virginia law, which can reduce uncertainty and level the playing field in disputes.
Post-Termination Non-Competes Take a Direct Hit
The second and more consequential change is found in § 13.1-563, which addresses non-compete agreements.
The statute now makes it unlawful to “offer or enter into a franchise agreement that restricts the right of a franchisee” to continue operating in a similar retail business after termination or expiration of the franchise agreement.
That marks a significant departure from the ways many franchise systems are structured. For franchisees, this is a notable expansion of post-exit flexibility. It opens the door to continuing in a similar line of business without being contractually sidelined, something that has historically been restricted. Furthermore, franchise agreement expirations will be treated the same as terminations.
Post-term non-compete clauses have long been a core protection for franchisors, designed to safeguard brand goodwill, system integrity and confidential information (such as trade secrets). Virginia’s amendment directly limits that tool.
The practical impact:
- Standard post-term non-competes in Virginia franchise agreements may be unenforceable
- Franchisors will need to rethink how they protect brand value post-termination
- Expect increased reliance on alternative protections (confidentiality, trademarks, trade secrets, and non-solicitation provisions)
Franchise sales trigger a different part of the Act.
A Distinct and Critical Exception for Sales
Virginia did not completely eliminate non-competes. Instead, it carved out a specific and limited exception.
Under new § 13.1-563(B), if a franchisee sells their franchise – either to a third party or back to the franchisor at a mutually agreed price – the parties may include a non-compete, but only for up to two years following the sale.
This distinction is critical. For example, if an agreement expires between a well-known ice cream franchise and franchisee in Arlington, the former franchisee can open a new ice cream shop in the same area. However, if the franchisee sells the unit, they must wait two years before opening an ice cream shop (or similar retail location).
What it means in practice:
- Non-competes tied to a bona fide sale transaction remain viable
- The restriction is capped at two years, without exception
- The enforceability of the restriction hinges on the existence of a legitimate sale
FDD and Registration Compliance: Immediate Action Required
The notice makes clear that compliance is not optional. Time is of the essence.
Franchisors registering or renewing in Virginia on or after July 1 must include language addressing these changes in their Franchise Disclosure Documents (FDD) and franchise agreements.
This can be done either:
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- Within the FDD itself (Item 17), or
- Through a Virginia-specific addendum
There is also a practical fork in the road for currently registered systems:
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- If you do not plan to sell franchises in Virginia before your current registration expires, you may wait to update your FDD at renewal.
- If you do plan to sell on or after July 1, 2026, you must file an amendment before doing so
This is a classic compliance trap. Selling a franchise in Virginia after July 1 without updated disclosures could create regulatory exposure and eventual litigation risk.
What Franchise Stakeholders Should Do Now
This is no time to “wait and see.” It is a “review and revise” moment, because July 1 will arrive before you know it.
Franchisors should update Virginia addenda and core agreements immediately, reassess post-term protection strategies and, most importantly, contact a franchise lawyer to establish a legal strategy and avoid non-compliant sales activity.
Franchisees and multi-unit operators should also contact franchise lawyers to reevaluate exit strategies in light of the new non-compete limitations and assess how to leverage the increased flexibility in post-term operations.
News, appointments, and state and federal laws are announced rapidly. 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.
Contact Lusthaus Law
Lusthaus Law’s website is a resource for New York franchisors and franchisees. We have published two downloadable and complimentary e-books and our Insights blog is regularly updated to reflect industry trends and recent achievements in client representation. Read our Q1 2026 roundup for legal actions that might impact your franchise.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s successful future.
