Va. Code Ann. tit. 13.1, ch. 8

in effect

Va. Code Ann. § 13.1-557 Short title

This chapter shall be known as the "Retail Franchising Act." 1972, c. 561.

Va. Code Ann. § 13.1-558 Policy of the Commonwealth

It is hereby declared to be the policy of the Commonwealth, through the exercise by the General Assembly of its power to regulate commerce partly or wholly within the Commonwealth of Virginia, to correct as rapidly as practicable such inequities as may exist in the franchise system so as to establish a more even balance of power between franchisors and franchisees; to require franchisors to deal fairly with their franchisees with reference to all aspects of the franchise relationship and to provide franchisees more direct, simple, and complete judicial relief against franchisors who fail to deal in a lawful manner with them. 1972, c. 561.

Va. Code Ann. § 13.1-559 Definitions; applicability of chapter

A. As used in this chapter, unless the context otherwise requires: "Commission" means the State Corporation Commission. "Controlling person" means a natural person who is an officer, director, or partner, or who occupies a similar status or performs a similar function, of a franchisor organized as a corporation, partnership, or other entity, or any person who possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of a franchisor, whether through the ownership of voting securities, by contract, or otherwise. "Franchise" means a written contract or agreement between two or more persons, by which: 1. A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services at retail under a marketing plan or system prescribed in substantial part by a franchisor; 2. The operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate; and 3. The franchisee is required to pay, directly or indirectly, a franchise fee of $500 or more. "Franchise fee" means a fee or charge for the right to enter into or maintain a business under a franchise, including a payment or deposit for goods, services, rights, or training, but not including: (i) the payment of a bona fide wholesale price for starting and continuing inventory of goods for resale or (ii) the payment at fair market value for the purchase or lease of real property, fixtures, equipment, or supplies necessary to enter into or maintain the business. "Franchisee" means a person to whom a franchise is granted or sold. "Franchisor" means a person, including a subfranchisor, who grants or sells, or offers to grant or sell, a franchise. "Offer" or "offer to sell" includes every attempt to offer to dispose of or grant, and every solicitation of an offer to buy, a franchise or an interest in a franchise for value. "Place of business" means a building or portion thereof from which the goods or services authorized by the franchise are sold or offered for sale in person by the franchisee or employees or agents of the franchisee, or a truck or van used in the sale of such goods which is of a type designated by the franchisor and is equipped and marked in conformance with requirements of the franchisor. "Preopening obligations" means the franchisor's obligations to provide to the franchisee, prior to the opening of the franchisee's business, real estate, improvements, equipment, inventory, training, or other items to be included in the offering. "Sale" or "sell" includes every contract or agreement of sale or grant of, contract to sell, or disposition of a franchise or interest in a franchise for value. "Subfranchisor" means a person who is authorized by a franchisor to grant a franchise within a particular geographic region. B. This chapter shall apply only to a franchise the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the Commonwealth of Virginia. C. A franchise does not include a contract or agreement by which a retailer of goods or services is granted the right either (i) to utilize a marketing plan or system to promote the sale or distribution of goods or services which are incidental and ancillary to the principal business of the retailer (sales under such a plan or system accounting for less than 20 percent of the retailer's gross sales being deemed incidental and ancillary); or (ii) to sell goods or services within, or appurtenant to, a retail business establishment as a department or division thereof provided such retailer is not required to purchase such goods or services from the operator of such establishment. D. Any franchise contract or agreement offered or entered into pursuant to the terms of this chapter shall be governed by the laws of the Commonwealth. 1972, c. 561; 1978, c. 670; 1990, c. 420; 1991, c. 475; 2007, c. 668 ; 2009, c. 148 ; 2026, cc. 553 , 554 .

Va. Code Ann. § 13.1-560 Registration required

It shall be unlawful for any person to sell or offer to sell a franchise in this Commonwealth unless the franchise is registered under the provisions of this chapter or exempted from registration by rule or order of the Commission. 1972, c. 561; 1978, c. 670; 2007, c. 668 ; 2009, c. 148 .

Va. Code Ann. § 13.1-561 Procedure for registration; bond; renewal; fee

A. A franchise may be registered after filing with the Commission an application containing such relevant information as the Commission may require. The franchise shall be registered if the Commission finds that the franchisor, including any controlling person of the franchisor, is a person of good character and reputation and that all information required of the applicant by the Commission has been supplied, that none of the grounds for revocation enumerated in § 13.1-562 are applicable to the franchise, and that the required fee has been paid. B. The Commission may require, as a condition of registration or renewal of registration: (i) the escrow or deferral of franchise fees and other funds paid by the franchisee to the franchisor until the franchisor's preopening obligations are fulfilled, if the grounds enumerated in clause (i) of subdivision A 2 of § 13.1-562 exist, or (ii) the filing by a franchisor of a surety bond conditioned upon the payment of all criminal and civil penalties provided in this chapter in an amount determined by the Commission to be adequate to protect the public and all franchisees of the franchisor, taking into proper account the marketing plan or system to be franchised, the goods or services to be offered, whether or not the franchisor has a regular place of business in this Commonwealth, and any other facts indicating the necessary amount of the bond. C. The Commission shall by rule or order prescribe the procedures for filing an application for exemption, amendments to the exemption, and when an exemption or renewal becomes effective. D. All registrations, exemptions and renewals thereof shall expire at midnight on the annual date of their effectiveness. However, the Commission may extend such expiration of an exemption as much as 45 days. E. Each application for the registration or exemption of a franchise shall be accompanied by a fee of $500, payable to the Treasurer of Virginia. Each application for the renewal of a franchise registration or exemption, including any amendments to the registration or exemption application which accompany or are part of the application for renewal, shall be accompanied by a fee of $250 payable to the Treasurer of Virginia. Unless submitted in connection with an application for renewal, each amendment or group of amendments to a registration or exemption application submitted after the application has been granted shall be accompanied by a fee of $100, payable to the Treasurer of Virginia. If the application for registration, exemption or renewal is withdrawn or is not granted, or if the registration or exemption application is not amended, the fee shall not be returnable. F. For the purposes of registration, exemption or renewal of registration of a franchise, a partnership shall be treated as the same partnership so long as two or more members of the partnership named in the application continue the business without change of location, and if the partnership, within one month after a change in the partnership, files with the Commission a copy of a certificate filed in compliance with § 50-74 . 1972, c. 561; 1978, c. 670; 1991, c. 475; 1992, c. 158; 2007, c. 668 .

Va. Code Ann. § 13.1-561.1 Fees to cover expense of regulation

The fees paid into the state treasury under this chapter, except for fees and funds collected for the Literary Fund, shall be deposited into a special fund and specifically accounted for and used by the State Corporation Commission to defray the costs of supervising, implementing, and administering the provisions of this chapter and Chapters 5 (§ 13.1-501 et seq.) and 6 (§ 13.1-528 et seq.) of this title, and Chapters 6.1 (§ 59.1-92.1 et seq.) and 7 (§ 59.1-93 et seq.) of Title 59.1. Included in the Commission's costs shall be a reasonable margin in the nature of a reserve fund. All excesses of fees collected exceeding these costs shall revert to the general fund. 1987, c. 434.

Va. Code Ann. § 13.1-562 Revocation of or refusal to renew registration

A. The Commission may, by order entered after a hearing on notice duly served on the defendant not less than thirty days before the date of the hearing, revoke the effectiveness of a franchise registration (or refuse to renew a registration if an application for renewal has been or is to be filed) if it finds that such an order is in the public interest or that the franchisor or any controlling person of the franchisor: 1. Has engaged in any fraudulent transaction; 2. Is insolvent, or in danger of becoming insolvent, either (i) in the sense that his liabilities exceed his assets or (ii) in the sense that he cannot meet his obligations as they mature; 3. Is a person for whom a conservator or guardian has been appointed and is acting; 4. Has been convicted, within or without this Commonwealth, of any misdemeanor involving a franchise, or any felony; 5. Has failed to furnish information requested by the Commission concerning the conduct of his business; or 6. Has violated any of the provisions of this chapter. B. If it appears to the Commission that it is in the public interest and that there exists one or more of the grounds enumerated in subdivisions (1) through (6) of subsection A of this section, the Commission may so notify the franchisor. The franchisor shall have seven business days from the date of the written notice from the Commission within which to file a written response to the matters addressed in the notice. If (i) the Commission notified, or reasonably attempted to notify, the franchisor in writing, (ii) it appears to be in the public interest, and (iii) either the Commission, after consideration of the franchisor's response, reasonably believes the ground or grounds exist or a response is not filed in a timely manner, the Commission may summarily enter an order suspending the effectiveness of the franchisor's registration pending final determination of any proceeding under this section. The Commission shall promptly send a copy of the suspension order to the franchisor and each of its subfranchisors, if any are known to the Commission. At a minimum, the order shall set forth the basis for the suspension as well as the franchisor's or subfranchisor's right to file a written request for a hearing within twenty-one days after the date of entry of the order. If a hearing is requested in a timely manner, the Commission, after notice and an opportunity for a hearing as soon as practicable, may modify or vacate the suspension order or continue it in effect until final determination of the proceeding under this section. If a hearing is not requested in a timely manner, the suspension order shall remain in effect until it is modified or vacated by the Commission. 1972, c. 561; 1978, c. 670; 1991, c. 475; 1997, c. 921 ; 2007, c. 668 .

Va. Code Ann. § 13.1-563 Unlawful offers

A. It shall be unlawful for any person, in connection with the sale or offer to sell a franchise in the Commonwealth, directly or indirectly: 1. To employ any device, scheme, or artifice to defraud; 2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to avoid misleading the offeree; 3. To engage in any transaction, practice, or course of business that operates or would operate as a fraud or deceit upon the franchisee; 4. To offer or enter into a franchise agreement that restricts the right of a franchisee to engage in the business of offering, selling, or distributing goods or services at retail after termination or expiration of the franchise agreement; or 5. To fail to provide the franchisee a copy of (i) the franchise agreement and (ii) such disclosure document as may be required by rule or order of the Commission. B. Notwithstanding the provisions of subsection A, in the event that a franchisee sells a franchise at a mutually agreed upon price to a third party or back to the franchisor, such sale may include a term restricting the right of such franchisee to engage in the business of offering, selling, or distributing goods or services at retail for a period of no more than two years after such sale. 1972, c. 561; 1978, c. 670; 1991, c. 475; 2009, c. 148 ; 2026, cc. 553 , 554 .

Va. Code Ann. § 13.1-564 Unlawful cancellation of franchise; undue influence

It shall be unlawful for a franchisor to cancel a franchise without reasonable cause or to use undue influence to induce a franchisee to surrender any right given to him by any provision contained in the franchise. 1972, c. 561.

Va. Code Ann. § 13.1-565 Voidable franchises

Any franchise may be declared void by the franchisee at his option by sending a written declaration of that fact and the reasons therefor to the franchisor by registered or certified mail if: 1. The franchisor's offer to sell a franchise was unlawful, as provided in § 13.1-560 or § 13.1-563 , provided that the franchisee send such written declaration within 72 hours after discovery thereof but not more than 90 days after execution of the franchise; 2. The franchisee was not afforded the opportunity to negotiate with the franchisor on all provisions within the franchise, except that such negotiations shall not result in the impairment of the uniform image and quality standards of the franchise, provided that the franchisee send such written declaration within 30 days after execution of the franchise; or 3. The franchisee was not furnished a copy of the franchise agreement and disclosure documents at least 72 hours prior to execution of the franchise, provided that the franchisee send such written declaration within 30 days after execution of the franchise. 1972, c. 561; 1978, c. 670; 1979, c. 104; 1991, c. 475; 2009, c. 148 .

Va. Code Ann. § 13.1-566 Service of process on nonresident franchisor

Every nonresident franchisor who has a franchise registered hereunder and which is not a corporation complying with § 13.1-759 or § 13.1-767 shall appoint in writing the clerk of the Commission as his agent upon whom may be served any process, notice, order or demand. Every nonresident franchisor who sells or offers to sell a franchise registered hereunder and every nonresident franchisor whose franchise is sold or offered to be sold in this Commonwealth shall be deemed to have appointed the clerk of the Commission as his agent upon whom may be served, in any matter arising under this chapter any process, notice, order or demand. Service may be made on the clerk in accordance with § 12.1-19.1 . 1972, c. 561; 1978, c. 670; 1990, c. 263; 1991, c. 672; 2009, c. 148 .

Va. Code Ann. § 13.1-567 Investigations; confidentiality of information and documents

The Commission may make such investigations within or outside of this Commonwealth as it deems necessary to determine whether any person has violated the provisions of this chapter or any order or injunction of the Commission, and any franchisor found guilty of such a violation may be required to pay the actual costs of the investigation including the time of the investigator. The Commission shall have power to issue subpoenas and subpoenas duces tecum to require the attendance of any person and the production of any papers for the purposes of such investigation. No person shall be excused from testifying on the ground that his testimony would tend to incriminate him, but if, after asserting his claim to the privilege, he is required to testify, he shall not be prosecuted or penalized on account of any transactions concerning which he does testify. Information or documents obtained or prepared by any member, subordinate or employee of the Commission in the course of any examination or investigation conducted pursuant to the provisions of this chapter shall be deemed confidential and shall not be disclosed to the public; provided, however, that nothing contained herein shall be interpreted to prohibit or limit (i) the publication of the findings, decisions, orders, judgments or opinions of the Commission; (ii) the use of any such information or documents in proceedings by or before the Commission or a hearing examiner appointed by the Commission; (iii) the disclosure of any such information or documents to any quasi-governmental entity substantially associated with the retail franchising business approved by rule of the Commission; or, (iv) the disclosure of any such information or documents to any governmental entity approved by rule of the Commission, or to any attorney for the Commonwealth, or to the Attorney General of Virginia. 1972, c. 561; 1979, c. 379.

Va. Code Ann. § 13.1-568 Injunctions

The Commission shall have all the power and authority of a court of record as provided in Article IX, Section 3 of the Constitution of Virginia to issue temporary and permanent injunctions against violations or attempted violations of this chapter or any order issued pursuant to this chapter. For the violation of any injunction or order issued under this chapter it shall have the same power to punish for contempt as a court of equity. 1972, c. 561; 1992, c. 468.

Va. Code Ann. § 13.1-569 Crimes

A. Any person who shall knowingly and willfully make, or cause to be made, any false statement in any book of account or other paper of any person subject to the provisions of this chapter, or knowingly and willfully exhibit any false paper to the Commission, or who shall knowingly and willfully commit any act declared unlawful by this chapter with the intent to defraud any franchisee or with intent to deceive the Commission as to any material fact for the purpose of inducing the Commission to take any action or refrain from taking any action pursuant to this chapter, shall be guilty of a Class 4 felony. B. Any person who shall knowingly make or cause to be made any false statement in any book of account or other paper of any person subject to the provisions of this chapter or exhibit any false paper to the Commission or who shall commit any act declared unlawful by this chapter shall be guilty of a misdemeanor, and on conviction, be punished by a fine of not less than $100 nor more than $5,000, or by confinement in jail for not less than thirty days nor more than one year, or by both such fine and imprisonment. C. Prosecutions under this section shall be instituted by indictments in the courts of record having jurisdiction of felonies within three years from the date of the offense. 1972, c. 561; 1978, c. 670.

Va. Code Ann. § 13.1-569.1 Commission may transmit record or complaint to locality where violation occurred

The Commission may transmit the record of any proceeding or complaint involving any violation of this chapter to the attorney for the Commonwealth in the county or city wherein the violation occurred. 1978, c. 670.

Va. Code Ann. § 13.1-570 Violations punishable by Commission

The Commission may, by judgment entered after a hearing on thirty days' notice to the defendant, if it be proved that the defendant has knowingly made any misrepresentation of a material fact for the purpose of inducing the Commission to take any action or to refrain from taking action, or has violated any provision of this chapter or any order, rule, or regulation of the Commission issued pursuant to this chapter, impose a civil penalty not exceeding $25,000, which shall be collectible by the process of the Commission as provided by law. Each franchise entered into contrary to the provisions of this chapter shall constitute a separate violation. The Commission may request the franchisor to rescind any franchise and to make restitution to the franchisee. If the franchisor complies with the request, the Commission shall consider such compliance in determining whether a penalty should be imposed on him on account of that illegal franchise, and if so, the amount of such penalty. 1972, c. 561; 1990, c. 31; 1991, c. 475; 2000, c. 166 .

Va. Code Ann. § 13.1-571 Civil remedies

(a) Any franchisee who has declared the franchise void under § 13.1-565 or who has suffered damages by reason of any violation of § 13.1-564 may bring an action against its franchisor to recover the damages sustained by reason thereof. Such franchisee, if successful, shall also be entitled to the costs of the action, including reasonable attorney's fees. (b) No suit shall be maintained to enforce any liability created under this section unless brought within four years after the cause of action upon which it is based arose. (c) Any condition, stipulation or provision binding any person to waive compliance with any provision of this chapter or of any rule or order thereunder shall be void; provided, however, that nothing contained herein shall bar the right of a franchisor and franchisee to agree to binding arbitration of disputes consistent with the provisions of this chapter. (d) The rights and remedies provided by this section shall be in addition to any and all other rights and remedies that may exist at law or in equity. 1972, c. 561.

Va. Code Ann. § 13.1-572 Rules and forms

A. The Commission shall have authority from time to time to make, amend and rescind such rules and forms as may be necessary to carry out the provisions of this chapter, including, but not limited to rules and forms governing disclosure documents, applications and reports, escrow and deferral of franchise fees and other funds paid by the franchisee, and defining accounting, technical and trade terms used in this chapter not inconsistent with the provisions of this chapter. The Commission shall have the authority, for the purpose of this chapter to prescribe the content and form of financial statements and to direct whether they should be certified by independent public or certified accountants. For the purpose of rules and forms, the Commission may classify franchises, persons and matters within its jurisdiction and prescribe different requirements for different classes. B. All such rules and forms shall be printed or mimeographed and available for distribution at the office of the Commission. 1972, c. 561; 1978, c. 670; 2007, c. 668 .

Va. Code Ann. § 13.1-573 Certain records of Commission available to public; admissibility of copies; destruction

The information contained in or filed with any registration statement, application or report shall be available to the public at the office of the Commission. Copies thereof certified by the clerk under the seal of the Commission shall be admissible in evidence in lieu of the originals, and the originals shall not be removed from the office of the Commission. However, papers, documents and files may be destroyed by the Commission when, in its opinion, they no longer serve any useful purpose. 1972, c. 561.

Va. Code Ann. § 13.1-574 Effective date

The provisions of this chapter shall apply to grants and offers to grant franchises on and after July 1, 1972. 1972, c. 561.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://law.lis.virginia.gov/vacode/title13.1/chapter8/Fetched: 10/16/2026