A Journey Through The History Of Franchising
Franchising, as we know it today, is a multi-million industry, providing fulfilling and lucrative livelihoods to thousands of franchisors and franchise owners alike. It’s origins however, can be traced back a long, long way, the word in fact deriving from the Anglo-French for freedom, or liberty, as well as from the Middle-French, franchir, also meaning to free.
We begin our journey through the history of franchising way back in the European Middle-Ages, where the first seeds of today’s highly successful business model were sown, and the fundamental concepts that define it began to emerge.
Commonly defined as a roughly thousand-year period between the fifth and fifteenth centuries, the age is remembered in modern times for difficult living standards for the poorest, who, lacking modern farming techniques, suffered from the effects of crop famine, at the same time as living in fear of pandemic diseases including the ‘black death’.
However, we in the franchising world remember it for the origins of the term, demonstrated in the granting by local government to high church officials of licenses to maintain order in their local populaces and evaluate taxes. Other licences granted included the right to run markets and fairs.
Later, the practice evolved to kings and lords (playing the role of franchisors) granting individuals (franchisee equivalents) the exclusive rights to brew beer and construct new roads in their ‘territories’, in exchange for royalties to the sovereign or lord. Here, we see the earliest examples of the franchise model.
Development Of The Model
Modern franchising came into play in various locations in the 1800s, as exploration and modernisation made the world a smaller and more competitive place to do business.
Moving closer to the modern age, we see the spread of franchising in Europe in the 1840s, with German ale brewers granting rights to distribute their ales to specific taverns. The model then spread to rapidly developing America, where one Isaac M. Singer is credited with beginning the franchise process. Singer sought to market his improved sewing machine to a wider consumer base, but lacked the funds to produce the quantities required for his Singer Sewing Machine Company.
This problem was solved by Singer selling the rights to sell the sewing machines in geographical territories, which in turn covered the additional manufacturing costs. Singer is significant as the first to actually produce franchise contracts, and his legacy is that these documents are the basis for modern franchise agreements. Recent discussion has questioned the extent of Singer’s company’s franchising, but he is generally still accepted as the ‘father of modern franchising’, and by the time of his death, was worth over $13 million; a huge amount for the time.
The early 20th century saw General Motors franchising automobile dealership and Coca-Cola selling its first franchises, and in the interwar years, Baskin Robbins and Kentucky Fried Chicken began their own franchise operations. The latter, in its days as a single restaurant, had suffered when the new interstate road system was built at too great a distance away to attract custom, but the ever-entrepreneurial owner, Harlan Sanders, made this situation work by convincing more fortuitously-placed restaurant owners to use his popular recipe for a five per cent royalty.
Despite these early shoots of franchising’s future, it was in the more affluent and secure capitalist post-war environment of North America that the business format franchise model really came into its own, as did demand for goods and services. As the advent of car ownership and fast modern travel at affordable costs began, more and more retail and restaurant-based franchises flourished. Some 100,000 new franchise businesses commenced in the five years between 1964 and 1969.
Ray Kroc is a name that will be known to many for his development of McDonald’s into the world’s largest fast food business. Small business-owner Ray became Senior Chairman of the company in 1961 after buying out the McDonald brothers, and by the late 1980s, had overseen the opening of restaurant number 10,000. Indeed, it was Ray who popularised the mantra commonly associated with franchising of 'in business for yourself, but not by yourself'.
Today, the franchise world is a vibrant place, covering all ends of the business spectrum from food and retail to recruitment, services and more. Governed by the International Franchise Association and individual governing bodies in countries worldwide, the world of franchising is a secure, proven business model that provides huge numbers of people with the working lifestyle they have always wanted.