Virginia has amended its Retail Franchising Act to prohibit franchise agreements from including noncompete provisions that extend beyond the term of the agreement, effective July 1, 2026. The change was announced in an April 27 statement and applies prospectively to new, extended, or modified franchise agreements after that date.
The amendment means franchisors will no longer be able to prevent former franchisees from competing in retail business after their agreement ends. However, there are exceptions: if a franchise is sold by the franchisee either to a third party or back to the franchisor at an agreed price, restrictions on competition for up to two years remain permitted. Agreements entered into before July 1, 2026 are not affected by this legislation.
Additionally, starting July 1, any new or modified franchise agreement that requires a place of business in Virginia must be governed by Virginia law. This measure also applies only going forward and does not retroactively affect existing contracts.
The move comes as scrutiny over noncompete clauses increases nationwide and within the context of franchising. The International Franchise Association has said such agreements are “especially critical to prevent former franchisees from unfairly using proprietary information to compete with current franchise small business owners, which would be detrimental to the franchise business model, the brands companies have built, and the local businesses franchisees run.” Meanwhile, in February 2026 commentary on post-termination noncompetes in franchising from the North American Securities Administrators Association recognized areas where protection through reasonable non-competes may still be warranted—such as system goodwill and customer relationships.
Franchisors operating in Virginia will need to review their existing contracts and remove any post-termination noncompete provisions before July 1, 2026 if they wish them to comply with state law. They are also advised to strengthen other methods for protecting trade secrets and proprietary assets where these types of clauses are banned or under increased legal scrutiny.
