Virginia Senate moves bill to protect retail franchise owners

Lawmakers advanced an amended bill yesterday that would prevent retail franchise owners from being barred from competing after their contracts end, while keeping some protections in place for franchise sales. 

SB 240, introduced by Sen. Christopher T. Head, R-Roanoke, establishes that retail franchise agreements are governed by the laws of the Commonwealth. It also prohibits anyone from offering or entering into a franchise agreement that imposes competition restrictions beyond the agreement’s termination or expiration, unless such restrictions are approved by a court with proper jurisdiction.

The bill is essentially focused on protecting franchisees from being compelled into non-compete agreements after their contracts end.

“The basis of the bill is the idea that you can’t force a non-compete agreement onto a franchisee,” Del. Dan Helmer, D-Fairfax Station, said in the House Labor and Commerce Subcommittee, “As amended it really addresses a situation in which a franchisee leaves the franchise agreement but does recognize that when you sell a franchise it is reasonable for the seller of the franchise that the buyer imposes a non-compete on them.”

Helmer described the latest version as the product of negotiations with stakeholders.

“I think the folks that are franchise owners are really excited about it, I think we’re gonna hear more neutral testimony about it, but we’re really excited to have been able to work with stakeholders to get to something that is more agreeable for everybody,” he said in subcommittee.

Melissa Assalone, with The 51 Group speaking on behalf of the International Franchise Association, said her organization is neutral on the bill following the amendments.

“We are neutral on the bill but really really do appreciate all the work that he and the senate patron did to get these amendments done on the bill,” Assalone said in subcommittee.

Ralston King, speaking on behalf of McDonald’s corporation, also voiced appreciation for the substitute version.

“We worked with Delegate Helmer and Senator Head on the substitute and we really appreciate working on the bill,” King said in subcommittee.

SB 240 was unanimously recommended for reporting with a substitute by House Labor and Commerce Subcommittee #2 on a 7–0 vote, advancing the measure to the full committee for further consideration. The bill was passed in the Senate with a unanimous vote of 40-0.