A new Alabama law shields franchisees from franchise termination if they close on a religious day—but most shop owners have never heard of it.
Most auto service franchise owners in Alabama don't realize they now have legal protection against losing their entire franchise investment over a religious observance dispute. That protection arrived quietly in Alabama's SB138, effective June 1, 2026.
Under Section 1(b)(3) of SB138, a franchisor—the company that owns and licenses the brand—is now prohibited from terminating or refusing to renew a franchise agreement solely because a franchisee closes on a religious day. That's the core of it. A franchisor cannot use a franchisee's religious day closure as the sole reason to end or decline to renew the franchise relationship.
The law applies to franchise agreements entered into or renewed on or after June 1, 2026.
For a franchisee, the franchise agreement is often the largest business asset they own. Losing it means losing the brand, the operational system, the customer base built under that brand, and years of investment. Before this law, a franchisee observing the Sabbath, a religious holiday, or another faith-based closure day faced a genuine business risk: a franchisor could cite the closure as grounds for non-renewal or termination.
SB138 eliminates that risk. A franchisor cannot point to religious day closures as justification for ending the relationship.
The law has teeth. If a franchisor violates this provision, the franchisee can pursue legal remedies including:
That penalty structure is designed to make violations expensive enough that franchisors take the requirement seriously.
The law does include exceptions. A franchisor can still refuse renewal or terminate if there are reasons other than the religious day closure—for example, failure to meet performance standards, breach of other franchise terms, or financial defaults. The protection only applies when the religious closure is the sole or primary stated reason.
If you operate an auto service franchise and observe a religious day, review your franchise agreement now. Understand what it says about operating hours and closures. If you're considering purchasing a franchise and religious observance is important to your business model, ask the franchisor in writing how they handle religious day closures and what the agreement permits. Keep that response in your records.
If you're already in a franchise relationship and have concerns about how your franchisor views your religious day closure, document your compliance with all other franchise terms and keep records of your communications.
The law is effective June 1, 2026. Industry groups and legal resources specific to auto service franchising in Alabama can provide detailed guidance tailored to your situation.
Source: Alabama SB138, Section 1(b)(3), effective June 1, 2026.