We’re halfway through the year and back again with an updated list of top Ins and Outs for 2026! We’ll be tracking these issues (the legal ones anyway) and more for you as the year goes on.

In: AI Use in Franchise Systems

Franchisors have been increasingly curious about use of artificial intelligence in franchise systems, including the plethora of publicly available chat bots. While AI has proven to be a rapidly expanding and incredibly efficient resource in many cases, it can also cause issues when a franchise system is not readily prepared to regulate or monitor how the AI programs are being used – particularly with the franchise system’s confidential information. Use of AI will look different from system to system, but one thing is consistent: franchisors must take preventative action to protect their confidential information and proprietary information from AI platforms that have insufficient security protocols for protecting such information.

Out: Post-Term Non-Competes in Virginia

On July 1, Virginia’s ban onpost-term non-compete restrictions in franchise agreements officially went into effect. In part, this new ban requires franchisors to include Virginia-specific language in their FDDs prior to offering or selling any additional franchises in the Commonwealth of Virginia, meaning franchisors without this language must file an amendment to bring their documents into compliance. If your FDD is registered in Virginia and has not yet been amended to include this language, please reach out to us. Check out our write-up on this topic here.

In: More Data Privacy Laws

There are currently 20 states that have passed comprehensive data privacy laws, several of which became effective in 2026. By 2027, it’s anticipated that this number will rise to at least 25 states with comprehensive consumer privacy laws, which is likely to include New York and Massachusetts. If these additional laws become effective, there will be a data privacy law applicable to roughly 65% of the U.S. population. With almost half of the states configuring their own regulations, it’s predicted that a federal privacy law is inevitable. It’s crucial for franchisors and franchisees to keep up with these laws and adapt their policies as necessary, paying particular attention to what customer information is collected, how the information is used, and the consequences of non-compliance with state-level regulations. We will continue to cover any changes with data privacy laws in the latter half of 2026 and beyond.

Out: Not Caring About Consumer Packaging

2026 has seen a rise in extended producer responsibility (EPR) rules and regulations at the state level, which effectively assign responsibility for consumer packaging (such as papers and most plastic materials) at its end-of-life stage, including in its post‑consumer collection, sorting, recycling, composting and final disposal. As of late 2025, seven states had enacted comprehensive EPR packaging regulations, while several other states are actively legislating similar laws. Franchisors must conduct a state-specific applicability analysis to determine if they are subject to these EPR laws, if any products or packaging used in the franchise system are considered materials covered under these laws, and whether any exemptions for the franchisor apply. The penalties for non-compliance can be severe – up to $100,000 per day in certain cases. There are several ways to work these obligations into your franchise documents and day-to-day operations.

In: Mid-Year FDD Check-Ins

Throughout the year, it’s important to take note of the contents of your FDDs and assess whether an amendment is warranted prior to renewal season. Your FDD must be amended upon the occurrence of any material change, which could be any significant event or development that would be important for a prospective franchisee to know about. For example, consider whether your organization’s leadership changed or if there been a significant increase or decrease in the number of locations in your franchise system.

In: the ABA Forum on Franchising

Cheng Cohen is going international in October for the 49th annual Forum on Franchising! Taking place in Toronto, Canada, many members of our team are packing up their passports and are getting ready to dive into all things franchising. We are looking forward to seeing our friends and clients!

Out: Kickball

The second annual kickball season has just concluded, and we finished the summer with an impressive 0-7 record (no, we didn’t get the numbers backwards).

In: Questions of the Day

A new office mainstay, you can find the daily question on a whiteboard in the lobby of our office. A recent favorite “Question of the Day” debated the correct way to cut a sandwich (which definitely has a correct answer).