A franchise is where someone has set up the business, figured out how to run it properly, while establishing the brand and routines. People can then invest in opening a location by buying a "franchise". They get the brand, the products, and the whole system associated with the brand. In addition, the person who invests in the chain is expected to pay a royalty to the parent company.
The whole idea of franchising has been around since the Middle Ages when feudal lords sold the right to others to collect taxes on their behalf so all those tax collectors you see in Robin Hood movies had paid for the right to collect all taxes. This is one of the first examples of a political franchise.
As far as a business franchise, this began in Germany in the 1800's when brewers sold the right to tavern owner to carry their brand exclusively. In the United States, one of the first franchises was established by Isaac Singer, the man who created the Singer sewing machine. He sold the rights to traveling salesmen to sell his product to people as they traveled across the land. He did this by charging an upfront fee, then gave the salesman a certain territory to sell in. After he sold a sewing machine, the sales person was required to teach the woman how to use it because it was part of the dal.
The next product to be franchised was Coca-Cola's product in the 1890's. They sold the right to produce and distribute this drink in specific territories to independent bottlers who understood they assumed all risks. In other words, if the product did not sell, the distributor would loose money, not the company but if it did well, they'd make money.
On the other hand, when Ford began producing his cars, his company had no way to sell the vehicles so he and General Motors began selling the right to independent dealers to sell their cars to the public. It wasn't long before oil companies offered repair stations the right to use their name and trademark. In addition, food places began franchising. A & W Root beer is one of the earliest recorded cases in 1924.
Howard Johnson began franchising their restaurants in 1935 and three years later, Arthur Murray began franchising his dance studios. By the 1950's and 60's franchising took off and many of our modern chains took off such as McDonald's, Kentucky Fried Chicken, Burger King, and so many others. You might wonder what caused franchising to take off during this time period.
Well there are two things that contributed to this. First, television expanded and more people began to watch shows paid for with advertisements. Second, the highway system developed, covering the United States from one coast to the other coast. The United States Government began to get involved in the 1970's when unscrupulous operators sold franchises to people, took their money, before going out of business. They established laws to cover this type of business so it is much safer now.
I hope you enjoyed this short history. Let me know what you think, I'd love to hear. Have a great day.
No comments:
Post a Comment