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The History Of Franchising
When most people hear the word “franchise” they may think of companies such as McDonald’s, Subway, or Wendy’s. What they do not know is that franchising has been around much longer than they realize. Actually franchising has been around for over 1,000 years in one from or another.
The infographic shown above and this article will take you on a journey through the amazing history of franchising.
The Middle Ages
When anyone studies the history of franchising, most people are not aware that the business model of franchising actually started over 1,500 years ago in the Middle Ages.
It was during this period that local government officials would grant rights to high church officials and other people of importance to asses taxes. They also granted them rights to maintain order. These first “franchisees” were allowed to set up markets and do other forms of business. They paid a royalty to the lords in exchange for protection among other things.
The Colonial Period
During the colonial period local lords would give permission to people of importance to set up markets, run the local ferries, and even hold and manage fairs. They even allowed them to hunt on their land. Kings would use the same concept and grant rights to “franchisees” to pursue various business activities. These “franchisees” would then pay a royalty to the King for protection.
A German brewing company called “SPATEN” granted rights to local tavern owners to sell their beer and use their brand name. The tavern owners paid the company to use their brand name in their establishment. This is really what franchising is about is it not? Franchisees in today’s modern franchises basically do the same thing which is pay to affiliate themselves with and use the brand name.
Mr. Isaac Merrit Singer who is the founder and inventor of the Singer sewing machine, was the father of modern day franchises. Mr. Singer would find people in geographical areas and grant them licenses to sell the sewing machine. These licensees paid for the right to sell the sewing machines. As part of their agreement with Mr. Singer, they even had to teach people how to use the sewing machine.
The Turn of the Century (late 1800s)
At the turn of the century, automobiles were beginning to sell. Automobile manufacturers needed a way to distribute their cars. One of the methods they used to distribute automobiles to more people was through auto dealerships. In 1896 William Metzger opened the first automobile dealership in Detroit Michigan. As car sales grew, so did the number of automobile dealerships. This gave auto manufacturers a network of franchises to sell their automobiles which helped to greatly increase sales.
As more people purchased automobiles and roads were being developed, oil companies began opening gas stations all along the new roads. Many of these were franchises. As the highway system continued to grow, restaurants also popped up everywhere along these new roads. It didn’t take long before many of these restaurants started franchising.
Ray Kroc, the man who would eventually become the originator of the modern franchise, opened the first McDonald’s franchise in 1955 in Des Plaines, Illinois and founded McDonald’s System, Inc. This later became the McDonald’s Corporation. Kroc bought out the McDonald brothers for $2.7 million in 1961 and took the company to over 500 restaurants in just 8 years. Today there are over 34,000 McDonald’s restaurants. The McDonald’s franchise system has paved the way for the modern franchises we see today.
1970s to 1990s
Franchising boomed in the late 1950’s through the end of the 1960’s. Through the 1970’s franchising had issues because franchisors lost focus on supporting their franchisees. Plus, there were also misrepresentations by some franchisors. After a period of cooling and oversaturation, the franchise model began to make a comeback in the late 1980’s and early 1990’s.
2000 and Beyond
The franchising business model continues to change and adapt to demand. The concept of multi-unit franchising and multi-brand franchising has changed the way franchisees operate their businesses.
The history of franchising is an amazing and exciting story. We believe that franchising will continue to be the best business model for many years to come.