Franchising in California
Franchising is a heavily regulated form of business in California. (Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1288 6 Cal. Rptr. 2d 386.)
A franchise is defined as a contract or agreement by which "a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor" and "the operation of the franchisee's business pursuant to that plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate." ( 20001, subds. (a) and (b).)
Accordingly, the franchisor retains some control over the franchisee. If the agreement gives the franchisor complete or substantial control over the franchisee an agency relationship exists. Otherwise, the franchisee will be considered an independent contractor. (Cislaw v. Southland Corp., supra, 4 Cal.App.4th at p. 1288.)
In any event, the franchisor is permitted to retain such control as is necessary to protect and maintain its trademark, trade name and goodwill. (Id. at p. 1295.)
The Dayton Time Lock Service, Inc. v. Silent Watchman Corp. (1975) 52 Cal. App. 3d 1 court's conclusion that "exclusive-dealing contracts are not necessarily invalid," must be viewed in the context of a franchise relationship. (Dayton Time Lock Service, Inc. v. Silent Watchman Corp., supra, 52 Cal.App.3d at p. 6.)
The franchisor must maintain some control over the franchisee.
In Dayton Time Lock Service, Inc., the court essentially determined that, as part of that control, a franchisor may employ an "exclusive-dealing contract" to promote and protect the franchise.