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Bill

SB 240

Retail franchise agreements; governing law, competition restrictions.

2026 Regular Session Introduced by Chris Head

SB 240 restricts non-compete clauses in Virginia retail franchise agreements while establishing governing law standards to protect franchisee business rights.

Approved by Governor-Chapter 554 (effective 7/1/2026)
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WeVote Research Nonpartisan
Bill Summary · SB 240

Legislative bill overview

SB 240 modifies Virginia law governing retail franchise agreements by establishing rules for governing law provisions and restricting certain non-compete clauses in franchise contracts. The bill appears designed to protect franchisees from overly restrictive covenant agreements that could limit their business opportunities after franchise termination or non-renewal.

Why is this important

Franchise agreements significantly impact small business owners who operate under established brand names but often have less bargaining power than franchisors. Clarifying permissible restrictions and governing law provisions affects thousands of Virginia franchisees and determines the enforceability of restrictive covenants that could prevent them from working in their industry afterward.

Potential points of contention

  • Franchisor concerns: Franchisors may argue that restricting non-compete provisions undermines their ability to protect proprietary business systems, customer relationships, and brand reputation after franchise relationships end
  • Enforceability questions: The bill's specific language on what competition restrictions are permissible versus prohibited could create litigation over borderline restrictions, generating uncertainty for both parties
  • Scope ambiguity: The precise applicability to different franchise types (fast food, retail, services) and whether certain legitimate business protections are inadvertently prohibited requires careful statutory interpretation

Compiled from official sources — confirm details with the bill’s official record.

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