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// 1. Turn on the "Show Values" option in a Gravity Forms select field

// 2. To start an optgroup, enter the label as you would like it 
//    to appear on the site, then in the value field enter 'start'

// 3. To end the optgroup, enter 'end' in the value field

// 4. Include the jQuery script below

jQuery(document).ready(function(){
     //Use the class you used for the drop down here, I used ‘custom-opt’
     jQuery('.custom-opt select option').each(function() {
        //look for 'start', start a new optgroup with the label 
        if(jQuery(this).val()=='start') {
            var label = jQuery(this).text();
            jQuery(this).replaceWith("<optgroup label='"+label+"'>");
        }
 
        //look for 'end' end the optgroup here
        if(jQuery(this).val()=='end') {
            jQuery(this).replaceWith('</optgroup>');
        }
    });
});