Franchise businesses – where a local small business owner licenses a name and operating system from an established brand – are important economic engines in communities across California.
The franchise industry supports the goal of AB 5; in fact, many franchise businesses have led the way on worker employment. However, as currently written, AB 5 could turn independent franchise owners into employees of the company from which they license their brand.
Franchise owners follow the same California employment laws as other businesses in the state adhere to. Choosing to license a brand name and invest in starting a franchise business shouldn’t mean these entrepreneurs are treated like employees of a corporation. In fact, they are independent risk takers and job creators who employ more than 700,000 Californians.
Franchising has helped many people start their own businesses. For many entrepreneurs, including first-generation immigrants, franchising was a ticket to the American Dream of prosperity and success without the risks of launching an untested business model. In fact, nearly one-third of franchises are started by recent immigrants; in comparison, only one-fifth of other types of businesses are immigrant led.
AB 5 threatens nearly $100 billion of California’s small business owners’ hard-earned money that would have created an estimated 86,000 jobs across 8,300 locations in 2020.
FRANdata analyzed and projected California franchise small business growth in 2020. According to their findings, AB 5 threatens:
8,300 new California small businesses
86,000 potential new jobs across California
$97.5 billion in local investment into new and existing California small businesses