We Make Change Happen: New Updates Coming To The Virginia Retail Franchising Act

At Franchise.Law, we are committed to driving meaningful change for our clients. Recently, we played a key role in advancing updates to the Virginia Retail Franchising Act. After The Virginia State Corporation Commission (SCC) asked for public insight regarding recommendations for changes to the Act, Franchise.Law voiced three different proposals to improve the law.

We are thrilled to announce that, following Commission approval, the SCC has adopted one of our proposed solutions, effective January 1, 2025!

What Is The Virginia Retail Franchising Act?

The Virginia Retail Franchise Act regulates the offer and sale of franchises within Virginia. Since its enactment in 1972, this state law has protected the fairness and legality of franchising activities. The Act has a number of detailed approaches to making a protected environment for franchisees.

Key Protections Under the Act

The Virginia Retail Franchise Act mirrors the FTC Amended Franchise Rule and ensures franchisees are provided with a Franchise Disclosure Document (FDD) by the franchisor.

The Act also prohibits the unlawful termination or non-renewal of franchise agreements, promoting fair and equitable business practices. Clear and detailed regulations further empower franchisees to hold franchisors accountable, enabling the identification and resolution of unlawful activities within the industry.

Additionally, the Act addresses economic disparities within franchising by acknowledging the resource imbalance between franchisors and franchisees. It encourages investments in franchises and requires franchisors to adhere to a specific code of conduct, ensuring fairness and fostering trust.

How Is The Virginia Retail Franchising Act Changing?

As of January 1, 2025, the Virginia Retail Franchise Act incorporates the following updates:

1. The SCC requires electronic submission of franchise registration, amendment, and renewal applications. This change streamlines the application process and helps to maintain a clear record of applications. 
2. The “Certification of Deferred Franchise Fee” (Form L) will be a required filing by franchisors who have elected fee deferral to meet the SCC’s financial assurance requirements. Franchisors who elect fee deferral agree to defer the collection of franchise fees until their pre-opening obligations are met and the franchisee has opened for business. 
3. Start-up franchisors will be required to provide opening balance sheets that meet the standards of the Generally Accepted Accounting Principles in the United States, ensuring uniformity among start-up franchisor disclosures utilizing the phase-in of audited financial statements.  
4. As an alternative to fee deferral, the SCC will accept a surety bond as a form of financial assurance when a franchisor is considered insolvent, offering flexibility for emerging franchisors while still protecting franchisees.

Overall, these changes will continue to protect the fairness of the franchising industry in Virginia, enabling better and more productive relations between franchisors and franchisees.

Franchise.Law Is Dedicated To Our Clients

The attorneys at Franchise.Law have dealt with financial assurance requirements in all franchise registration states, and they have specifically seen some of the issues that arise with surety bond administration. This prompted the firm to file comments with the Virginia SCC, seeking to streamline the surety bond process to allow emerging franchisors to avoid cash flow problems that arise from fee deferral. Franchise.Law is proud to have contributed to these amendments, particularly the adoption of the Form L and acceptance and modification of surety bonds. These changes will make franchising activities even more accessible, efficient, and fair to emerging franchisors that register in Virginia.

We believe that meaningful reforms come from those who work in the industry daily. Representing the voices of our clients, we are dedicated to making the franchising process better for everyone. We are excited to see the benefits of these changes this year and for years to come!

If you have questions about these changes to the Virginia Retail Franchise Act or about how they might impact your franchising opportunities, our team is here to help—contact us today!