Watch Me Franchise!

Although the word “franchise” is a French derivative meaning privilege or freedom, most sources trace the origins of franchising back to Europe in the 1800’s. Back then German beer makers granted local taverns and pubs the rights to sell their beer and the license to use their names.

However, Isaac Merritt Singer is the person credited with starting the modern use of franchising in the United States. Back in 1950 Singer came up with a new and improved sewing machine, but lacked the finances to find a wide distribution network for his products. In addition, he realized that people would need training to learn how to use their sewing machines, but opening multiple locations to provide training was not an option for Singer. In order to overcome his obstacles, Singer came up with the idea of charging a licensing fee to people who would own the rights to sell his machines, and provide training, in certain geographical areas. This solution provided Singer with enough funds to manufacture his machines and ship them to his individual resellers.

Many claim that Singer’s contract, not his concept, was actually what sparked the creation of franchises over the next few years. His contract allowed business owners to retain some control over how the individual franchises operated, while allowing individual franchisees the ability to have control over the day to day operations of their businesses.

Over the next few decades other businesses quickly began to copy and modify the franchising business model that Singer created. Coca-Cola was one of the first to begin using franchising as a method to increase their distribution. Coca-Cola began franchising their manufacturing and bottling locations in order to reduce their overall financial risk and lower their distribution costs by allowing their soda to be bottled at numerous locations across the country.

The modern business franchising format of licensing a brand name/trademarks and a business concept, began after the second World War. There was an overwhelming need for all types of services and products with the influx of baby boomers, and franchising provided an excellent opportunity for economic growth.

Although Isaac Singer is credited with the modern concept of franchising, it was Ray Kroc who is credited with starting the massive wave of franchising that is still continuing today. Kroc was a milk shake mixer salesman who discovered the McDonald brother’s small hamburger stand in 1954. Kroc noticed that the McDonald brothers were purchasing multiple mixers because they had come up with a high-volume production system that allowed them to provide speedy service at a low price without sacrificing quality. Kroc teamed up with the McDonald brothers by acting as their licensing agent and recruiting potential franchisees. He purchased the brother’s interest in McDonalds in 1961 and took title of senior chairman. Over the next decade McDonalds became the fastest growing franchise b opening up over 1,000 stores within just 10 years.

But McDonalds wasn’t alone in sparking the interest in franchise businesses. By the early 1960’s franchisors of convenience goods and services began popping up on nearly every corner. Some of the major players in the early franchise business include Kentucky Fried Chicken, Midas Muffler, Holiday Inn, and Budget Rental Cars.

As always, the franchise business model continues to evolved and adapt as the economy changes. One of the major changes that has emerged in the last decade is the multi-unit franchising concept. This new concept allows many savvy and aggressive franchisees to move beyond just running a single franchise unit and open up several different locations in a given territory.