MCLE SELF-STUDY: CALIFORNIA FRANCHISES: EMERGING LITIGATION

AUTHOR^*

Timothy G. Williams

A franchise business model is typically characterized by an arrangement in which an independent business owner (the franchisee) pays fees to an established company (the franchisor) to license the franchisor’s name, trademark, and business model. Both parties benefit: The franchisee benefits from brand recognition and operational guidance without having to develop a new product or start a business from scratch; the franchisor receives rapid and inexpensive expansion and limited liability.¹

Franchising also positively impacts the economy. There are currently more than 821,000 franchise operations in the United States, employing approximately 170 million U.S. workers²â€”an estimated 5% of the workforce. Franchise businesses account for roughly 40% of all U.S. retail sales³ and 7% of the U.S. Gross Domestic Product. In California, approximately 76,000 franchises employ nearly 729,000 people and generate $69.4 billion of the state’s economic output.⁴