Under the Virginia Retail Franchising Act, what constitutes 'reasonable cause' for Budget to cancel a franchise agreement?

According to the 2025 Budget Franchise Disclosure Document, under Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for Budget to cancel a franchise without 'reasonable cause'. The FDD clarifies that if any grounds for default or termination stated in the License Agreement do not constitute 'reasonable cause' as defined in the Virginia Retail Franchising Act or the laws of Virginia, that specific provision may not be enforceable.

This means that while the Budget License Agreement likely outlines specific reasons for which Budget can terminate the agreement, those reasons must align with the legal definition of 'reasonable cause' under Virginia law. If a stated reason for termination in the agreement is deemed not to be 'reasonable cause' under Virginia law, Budget may not be able to enforce that particular termination clause.

For a prospective Budget franchisee in Virginia, this is an important protection. It prevents Budget from terminating the franchise agreement based on arbitrary or unfair reasons. However, the FDD does not define what constitutes 'reasonable cause' under Virginia law, so a prospective franchisee should seek legal counsel to understand their rights and protections under the Virginia Retail Franchising Act. They should also carefully review the License Agreement to identify the stated grounds for termination and assess whether those grounds would likely be considered 'reasonable cause' in Virginia.