Virginia has amended its Retail Franchising Act (the “Act”) to ban the use of post-term non-compete restrictions in franchise agreements. The new law takes effect on July 1, 2026, and is prospective only—franchise agreements that were “entered into, extended, or amended” on or before that date are not affected. The law also mandates that Virginia law will apply to any franchise agreement that is offered or entered into under the Act, precluding the designation of another state’s law in the franchise agreement.

2026 Registrations and Sales

The new law will impact existing registrations for franchisors that may sell a franchise in Virginia after the July 1, 2026 effective date. Unless a franchisor’s 2026 Franchise Disclosure Document (“FDD”) currently registered in Virginia already complies with the amended law, the franchisor must file an amendment after July 1 in order to continue to offer and sell franchises under the Act.

Prohibition on Non-Compete Provisions

Under the new statute, it will be unlawful to restrict a franchisee from engaging in the offer, sale, or distribution of goods or services following the termination or expiration of the franchise agreement. For franchisors that have long relied on these provisions, this is a meaningful shift, and they should consider whether existing confidentiality, non-solicitation, and other protective provisions are enough to fill the gap that the new statute creates for franchises offered or entered into in Virginia. Also, it is important to note that non-compete obligations secured in connection with a sale transaction is not covered by the Act’s ban on non-competes.