On September 18, 2019, California Governor Gavin Newsom signed into law Assembly Bill 5, or AB-5, which the state’s legislature had passed on September 11. Through its codification and wide-ranging application of the so-called ABC Test, AB-5 could potentially turn franchising – where an independent owner licenses a brand name and an operating system from an established brand – into a corporate model, where independent owners and their employees are effectively absorbed into a single company.
With this bill’s passage, California has upended an entire business model and thrown thousands of small business owners’ livelihoods into flux. AB-5’s overly broad language makes franchising’s future uncertain in California. The legislation takes effect on January 1, 2020.
How Does This Affect My Business?
Unfortunately, this law leaves many franchise businesses with more questions than answers. Compounded by the variances in how franchise systems are structured, and the untested […]