Legal
Gov. Abigail Spanberger signed HB 69/SB 240 on April 13, 2026, amending the Virginia Retail Franchising Act to void post-term non-compete clauses and require Virginia governing law in all covered franchise agreements.
Any franchise agreement entered into, extended, or modified on or after July 1, 2026 that is covered by the Virginia Retail Franchising Act cannot include a post-termination non-compete provision. If a franchisor attempts to include one, that clause would be unlawful under Virginia law. The agreement must also be governed by Virginia law — the franchisor cannot select another state's law as the governing law in the agreement.
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No. The legislation expressly states that nothing in the act alters, modifies, or impairs any contract entered into, extended, or amended prior to July 1, 2026. This means current franchisees with existing agreements that include post-termination non-competes remain subject to those provisions. The new protections apply only to agreements executed or modified on or after the effective date.
Yes, one narrow exception exists. If a franchisee voluntarily sells the franchise — whether to a third party or back to the franchisor — at a mutually agreed price, the sale transaction may include a non-compete provision for up to two years following the sale closing. This exception is limited to voluntary arm's-length sale transactions and does not apply to standard termination or expiration of the franchise term.
As of July 1, 2026 — eighteen days away — franchise agreements entered into or modified in Virginia will no longer be permitted to include post-termination non-compete clauses under state law. Virginia Governor Abigail Spanberger signed HB 69/SB 240 on April 13, 2026, amending the Virginia Retail Franchising Act in two significant ways: eliminating the enforceability of post-term non-competes in franchise agreements and requiring that all covered franchise agreements be governed by Virginia law, regardless of any governing law clause the franchisor may prefer.
The Virginia General Assembly passed HB 69/SB 240 on March 31, 2026, and Governor Abigail Spanberger signed it into law on April 13, 2026 [1]. The amendments to the Virginia Retail Franchising Act take effect July 1, 2026.
The law makes two substantive changes [2]:
First, it prohibits post-termination and post-expiration non-compete provisions in franchise agreements covered by the Act. It is unlawful under the amended statute 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 the franchise agreement terminates or expires [1].
Second, all franchise agreements covered by the Act must now be governed by Virginia law [2]. A franchisor cannot select another state's law as the governing law in the franchise agreement — any governing law clause that selects another state's law will be superseded by this requirement for Virginia-covered agreements.
One narrow carve-out was written into the statute: voluntary franchise sale transactions — whether a franchisee sells to a third party or back to the franchisor at a mutually agreed price — may include a post-sale non-compete provision for up to two years following the closing [3]. This exception is limited to arm's-length sale transactions and does not apply to termination by breach, expiration of the franchise term, or other non-voluntary endings.
Existing agreements are grandfathered: the legislation expressly states that nothing in the act alters, modifies, or impairs any contract entered into, extended, or amended prior to July 1, 2026 [3].
For anyone buying a franchise in Virginia on or after July 1, 2026, this law materially changes the post-exit landscape. Under prior law, a franchisor could enforce a non-compete clause that prevented the franchisee from operating a competing business in the same territory for a period of years after the franchise relationship ended. That restriction is now prohibited for new and renewed agreements [1].
The practical implication for buyers: exit planning in Virginia just became more flexible. A franchisee who builds a customer base, operational knowledge, and staff relationships over a multi-year franchise term cannot be contractually barred from deploying that expertise in a competing business after the franchise ends. This changes the risk calculus for buyers who are uncertain about long-term fit with a particular franchise brand.
The governing law requirement has a less visible but equally significant effect. Many franchise agreements historically select the franchisor's home state as governing law — often a jurisdiction with franchisor-friendly precedent or court interpretation of franchise disputes. For agreements signed in Virginia on or after July 1, 2026, Virginia law governs regardless of what the agreement says [2]. Buyers and their attorneys should understand which Virginia franchise protections and courts apply as a result.
Franchisors who operate in Virginia must update their franchise agreement templates before July 1 to remove prohibited non-compete clauses and adjust governing law provisions — or risk offering a franchise agreement that violates the amended Act [4].
Franchisors operating in Virginia should have already consulted with franchise counsel to update agreement templates. The compliance deadline of July 1, 2026 is imminent — any franchise agreement executed or renewed in Virginia on that date or later that contains a prohibited non-compete will violate the amended Retail Franchising Act [4].
Prospective buyers in Virginia should request their franchisor's current franchise agreement and confirm it complies with HB 69/SB 240 before signing. If a franchisor presents an agreement dated after July 1, 2026 that still contains a post-termination non-compete, that is a compliance red flag worth raising with both franchise counsel and the franchisor [2].
Broader franchise law reform activity at the state level is worth monitoring. Virginia's action follows a pattern of states increasing franchisee protections through targeted legislation. The FTC's record $17 million enforcement action against Xponential Fitness in March 2026 for franchise disclosure violations signals continued federal attention to the space as well [3].