A couple of Hollywood talent scouts look for Fonzie when their limousine breaks down while passing through Milwaukee, and when they find him they like Fonzie's looks. Thinking that he could be the next James Dean, they invite Fonzie to Hollywood for a film audition. With Potsie and Ralph eager to impress the scouts too, Fonzie invites them and the Cunningham family to join him on his trip to Hollywood. But his big screen test is not all that Fonzie has to be concerned with—-an obnoxious local hero, who calls himself "the California Kid," challenges Fonzie to a water skiing duel.

Note: This episode introduces Scott Baio as Chachi Arcola, Fonzie's cousin and future boyfriend (and later husband) of Joanie.

Note: Lorne Greene appears in an uncredited cameo in Part 1.

"The California Kid" challenges Fonzie to jump over a tiger shark on water skis, convinced that he will be too scared and back out. Fonzie is too proud to back down and accepts the challenge. Meanwhile; Richie, after impressing a talent scout at Fonzie's audition, mulls over a decision about the film contract he has been offered.

Concerned about the lack of action in his love life, Richie asks Fonzie for some dating advice. Fonzie suggests that they go to the college library to meet sophisticated college girls, where Richie meets the attractive Lori Beth. But when they go back to her dorm, Richie learns that the hall's doors are locked at 10:00pm sharp, and he is now locked in for the night. If Richie is discovered, Lori Beth will be expelled.

Note: This episode introduces Lynda Goodfriend as Lori Beth Allen, Richie's girlfriend and future wife. (Goodfriend had previously appeared in two earlier episodes as a different character, Kim, a girlfriend of Richie and Ralph.)

When Chachi gets in trouble with the truant officer for skipping school, Fonzie tells his young cousin that if he gets good grades he can have a part-time job at the garage, as an incentive to stay in school. But the idea backfires when Chachi decides to cheat on an exam, tricking the answers out of Joanie. When Fonzie finds out, he is enraged.

Fonzie is ill, and the doctor says he must go into the hospital the next day to have his tonsils removed, meaning that he will miss the Cunninghams' Halloween party. Fonzie does not take the news well; and to add insult to injury, the only available room in the hospital is on the children's ward.

Note: Tom Bosley's daughter Amy portrays one of the "trick-or-treaters," while two of director Garry Marshall's children appear as hospitalized children.

Richie, Potsie, and Ralph rent an apartment owned by Chachi's mother. Despite its run-down condition, they are all excited to have a place of their own. But things turn sour when Potsie and Ralph continually argue, leaving Richie desperately trying to keep the peace.

Notes:

• Potsie and Ralph continue to live in the apartment after this episode (Richie decides to return home). This situation remains until Richie and Ralph leave the series for the Army.
• This episode was intended to be the pilot for a proposed spinoff series "Ralph and Potsie," but the series never evolved.
• Although out of order, this was the first episode of the season produced.

Pinky Tuscadero's sister Leather Tuscadero ( Suzi Quatro), a reformed thief-turned-musician, comes to town with her backup singers, the Suedes, to audition for a gig at Arnold's. Fonzie is wary of her after having his heart broken by Pinky, not to mention that Leather once stole his wallet and comb. But that is the least of Leather's worries; Officer Kirk threatens to close the place down if Al hires any ex-cons.

With an apparent promise of celebrity status, Leather & the Suedes go on tour beginning in San Francisco. Joanie, who had been singing with the group, is determined to go with them; but when her parents object, Joanie runs away, determined to join the group anyway.

Ralph is in love with Kitty, a beautiful young woman, who is in an unhappy relationship with the football team's star fullback, Rebel E. Lee. When Rebel finds out about the pair's relationship, he is furious with Ralph. Instead of a fight, Fonzie arranges a boxing match between the pair to settle the dispute. But there's one problem: Ralph cannot box to save his life.

Howard's 65-year-old father, Sean "Cap" Cunningham (special guest star Danny Thomas), a police detective recently forced into retirement, comes to visit the family, but announces that he is already bored with retirement and plans to look for a job. Will he find a job that suits him?

Potsie falls in love with Jennifer Jerome, a pretty girl whom he met in a kissing booth. After just one date, Potsie decides that he wants to marry her. The rest of the gang are unsure of Potsie's intention and persuades Howard to have a talk with him, who suggests that they get "pinned" instead. (Coincidentally, Anson Williams and Lorrie Mahaffey - who played Jennifer - were soon married after the shooting of this episode.)

After a friend of the family leaves his wife for a younger woman, Marion begins to worry that Howard might do the same to her and decides to try to prove to him that she's still young at heart—but goes completely over the top, Salome-style.

Richie has bought a motorcycle. His parents are very unhappy about it, but he convinces them that everything will be okay. He is then involved in a very serious accident on the bike, which leaves him hospitalized with a coma. As the rest of the gang anxiously await news, Fonzie holds a bedside vigil to try to help pull his friend through. During a somber moment at the Cunninghams, Leather plays the piano and sings while a montage of scenes from past episodes involving Richie are shown.

Recurring guest: Suzi Quatro as Leather Tuscadero

It's Valentine's Day; and at Arnold's, as the gang exchange cards and gifts, Joanie daydreams about the romantic songs that they could sing to each other.

When Chachi arrives at Arnold's wearing a gang jacket; Richie tells him the story of how he first met Fonzie, who was involved with a gang (The Falcons), to try to illustrate to Chachi that gangs are nothing but trouble.

Mork ( Robin Williams), an alien from the planet Ork, arrives on Earth and tries to take Richie back to his native planet as an example of an average "humdrum" human, but Fonzie stands in his way.

Lori Beth is assigned to write a report on the average middle-class American family, and interviews various members of the gang about their memories of Richie and his family (which they reveal through clips from past episodes). But Richie is concerned that she is trying to find out about his previous girlfriends.

When Richie gets jealous of Lori Beth's friendships with other men, they argue and break up; but agree to go on a weekend trip where the band is performing with Leather & the Suedes. However, their squabbling continues throughout the trip.

Howard and Fonzie are summoned for jury duty. The case involves an African-American biker who is accused of stealing an old lady's purse, and it seems to be an open-and-shut case. However, Fonzie hangs the jury, believing that the young man is "not guilty-amundo," and must convince the rest of the jury.