- On January 18, 2018
Introduction to the History of Franchising
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We’ve researched the history of franchising from it’s early days all the way to franchising in 2018. Learn about the first franchises in recorded human history. See how these early business arrangements influenced the commercial franchising models that followed.
Read more and learn the role franchising played in the development of the United States. From the original 13 colonies to today’s modern companies, franchises have grown the nation.
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The Early Days of Franchising – How Did Franchising Begin?
The first franchises can be traced back to the Middle Ages (circa 476 CE – pre-Renaissance 14th century.) Although not quite the franchise business models of the 1800’s, these are the first franchises in recorded history. Over the next two hundred years, these franchises lead to the exploration of uncharted lands and the discovery of new goods.
Franchises in Medieval Europe & Feudal Times (900 – 1400)
The crown in England and other parts of Europe would franchise government land to nobleman and church officials. In exchange for the land, the landowners would raise armies, collect taxes and establish toll roads. Governed under European Common law, these were the first franchise royalty payments. In addition, these nobles and church officials would occasionally offer the land to farmers in exchange for a portion of their crops.
Franchises in The Renaissance (Late 1400’s – 1600’s)
– In 1492, when Europe first discovered the continents now known as Asia and Africa, governments and corporations financed the exploration of the New World with franchise opportunities. These early franchises were related to land ownership, spice trade, travel routes and slavery.
– In 1641, Henry Hudson was employed by the Dutch India Company to explore the American continents. His discovery of the Northeast passage gave the franchise exclusive access to this lucrative trade route. However, by 1799 the company went bankrupt and was taken over by the Dutch government.
How Franchising Helped Develop America
Did you know that franchising helped make America the country it is today? From the colonial era into the industrial revolution, franchises have been at the forefront of the nation’s development. Of all the markets to franchise after the industrial revolution, food service scaled into one of the largest, most impactful industries.
Franchises in The American Colonial Era (1700’s – 1850’s)
– At the turn of the 18th century, European governments and corporations sponsored the settling of foreign lands in America. They used franchise agreements to lay out the ownership of the land and remuneration terms of the sponsorship. In exchange for financing the excursion, colonists were expected to pay taxes to these companies.
– In 1731, Benjamin Franklin entered one of the first franchises into American record. He formed a “co-partnership” with Thomas Whitmarsh with the intention of establishing a printing press business in South Carolina. The franchise agreement outlined the ownership of intellectual property, the division of equity and disbursement of profits.
– Over the next decade, Franklin would “co-partner” with dozens of other franchisees to bring his printing operations across the fledgling nation.
Franchises and The Industrial Revolution (1850’s – 1900’s)
– The industrial revolution created a new supply-and-demand model in America. Once large scale production became possible, franchise opportunities were available in machine manufacturing, mass-produced goods, and chemicals.
– The first time a commercial franchise business model was used in America was in 1851. The Singer Sewing Machine Company, founded by Isaac Merritt Singer, offered localized company control to owner/operators in exchange for a share in the profits. Singer’s company also provided manufacturing equipment and support services to his franchisee’s factories.
– In 1898, General Motors sold their first auto manufacturing franchise in Detroit Michigan.
– With the soft drink industry born from mass manufacturing, the first Coca-Cola bottling plant was franchised in 1901.
WWII And The Big Franchising Boom (1940’s – 1950’s)
– With an explosive consumer demand and a soaring economy, the United States of America experienced a franchise boom after World War II. New franchise markets emerged, including:
– automotive aftermarket cosmetics and services (Midas Muffler)
– convenience stores (7-Eleven Inc.)
– professional accounting (H&R Block)
– commercial optometry and glasses fabrication (Pearle Vision)
Restaurants Change The Franchising Game
– After pairing inventive soft serve ice cream and family atmosphere, Dairy Queen offered franchise opportunities in 1940. In 1941, Dairy Queen had just 10 locations. In just over ten years, the company expanded to 2,600 franchise locations. Today, Dairy Queen is ranked #6 in the Entrepreneur 2017 Franchise 500 Ranking. After franchising for 73 years, there are over 6,000 Dairy Queen locations in the United States, Canada, China, Egypt and over 20 other countries.
– In 1952, Richard and Maurice McDonald franchised their second restaurant location. In 1954, Ray Kroc began licensing the rights to McDonald’s locations outside their home territory. He gave the founding McDonald brothers ½ of 1% of the gross sales from all franchises. By 1958, McDonald’s sold their 100 millionth hamburger. On April 21st, 1965, McDonald’s made their initial public offering (IPO) at $30 a share. On average, today’s McDonald’s stock trades at over 600% that initial valuation.
Franchising Today in 2018
What does the world of Franchising look like in 2018? The food service industry is still one of the most successful and profitable businesses for a franchisee. There are more innovative companies than ever before, and the franchise market continues to grow. Even top brand names have affordable franchise opportunities. Franchises are now available in almost every industry including healthcare.
Food is Still a Leading Franchise Model
– In Entrepreneur’s 38th annual Franchise 500 ranking, four of the top five franchises are involved in food service: 7-Eleven Inc, McDonald’s, Dunkin Donuts and Jimmy John’s Gourmet Sandwiches.
– In Forbes Top 20 Franchises for the Buck, almost half of the franchises are in the food and beverage industry.
– According to 2017 projections by the Franchise Education and Research Foundation (FERF), retail food service franchise locations will grow by 1.2% and profits will increase by over $30 million.
– The Franchise Business Economic Outlook for 2017 projects the full-service food/restaurant market will grow even larger; franchise locations will increase 1.9% with an over $67 million projected profit increase.
– Of Entrepreneur’s 7 Innovative New Franchises for 2017, three of the seven franchises are food and hospitality related: Blaize Fred Pizza, Cousins Maine Lobster, and Curio.
Franchises are Growing
– In Entrepreneur’s 2017 Franchise 500 ranking, 22% of the responding companies started franchising their business in the past 5 years.
– According to the Franchise Business Index, the American franchise market will grow 0.6% larger than last year, with a 2.7% month-by-month rate of growth. This estimate is derived from employment data, output projections, and forecasted growth of franchise establishments.
Conclusion to the History of Franchising
Since the earliest recorded business arrangements, franchising has proved a successful model for both partners. Although royalties weren’t always paid in cash, franchisors have always provided franchisees with the resources they need to make more money for both parties.
Franchising helped America find Independence in the Colonial era. During the industrial revolution, franchising models helped manufacturing plants proliferate throughout the country.
In 2018, franchise opportunities are as abundant as they’ve ever been. Do you dream of owning your own franchise? Now that you’ve learned the history of franchising, there’s never been a better time to get started! Contact us and find out how Franchise Creator will make you into a franchise owner!