History of Franchising to Now (Infographic)

A History of Franchises to Now (Infographic)

The franchising industry is currently in a good state.  Growth in the industry continues to outperform the larger economy and there are 750,000+ franchised businesses in the U.S., cumulatively generating $1 trillion in sales a year.  Franchises are big contributors to economic growth in the country, begging the question, where did franchises come from? 

It turns out the roots of franchising lie in several different times and locations, the first being in feudal France and England.  In fact, the word “franchise” comes from the Anglo-French “franchir,” meaning to overcome or breakthrough an obstacle.  In feudal Europe, lords would grant peasants rights to use parts of their land in return for fees.  Common uses for the land would be running a marketplace or operating wells for the larger village.

Later in England, the franchising model arose again to meet struggles in the public house industry (e.g. pubs, bars, taverns).  It was often difficult to start a public house due to the high capital costs required and a lack of access to financing.  These problems eventually started affected brewers’ business in the country as their market for alcohol became unstable due to these persistent distribution issues.  Brewers responded to this market change by offering public house owners financial support in return for an exclusivity agreement over the beverages sold in the establishment.  Thus, publicans could open businesses more easily and brewers had consistent demand for their products.

Isaac Singer is the man credited with inventing the first modern franchise.  Singer was a sewing machine manufacturer with a popular and effective product, but insufficient cash flow to expand his manufacturing efforts.  In order to grow his company, I. M. Singer & Co, Singer began to solicit local merchants and salesman to distribute his product.  By training them to service and repair his sewing machines, as well as encourage them to become regional salesman for the product, Singer engaged in one of the first forms of mass marketing.

Singer’s next innovation was to develop a contract outlining compensation and duties for all parties involved.  The standardized nature of these contracts allowed him to recruit franchisees very quickly and predictably, and acted as one of the first franchise agreements.  By 1860, Singer’s company was the largest manufacturer of sewing machines in the world.  This was remarkable in the post-Civil War Era; especially considering the company was founded in 1951.

Franchising grew rapidly in the 1950s and 1960s as the Greatest Generation recovered from World War II and the Baby Boomers began increasing demand for all sorts of services and products.  Soda manufactures like Coca-Cola and Pepsi had primitive franchise systems in place at the time, distributing their soda syrup to local franchises that would then carbonate, bottle, and sell them to their local communities.  However, it was Ray Kroc, the founder of McDonald’s, who would spark the rapid proliferation of the franchise business model.

Starting off as a milkshake mixer salesman, Kroc discovered that one restaurant he frequented was buying a large number of his high-efficiency mixers.  The owners, called the McDonald brothers, had developed a fast food delivery system providing customers with quick and consistent meals.   Seeing its potential as a larger business model, he quickly became their licensing agent and began to recruit franchisees, eventually purchasing the company in 1961.  McDonald’s went on to open more than 1,000 units in just 10 years.  Following his success, brands such as Kentucky Fried Chicken, Midas Muffler, Holiday Inn, and more refocused their efforts towards franchising.

Franchising remains on the healthiest industries in the United States, continually showing strong growth and high job creation numbers.  Take a look at the infographic below from the Wall Street Journal to find out more about the current state of franchising in the United States.  There are a lot of perks that come from becoming an entrepreneur and engaging in the franchise business model.  If you would like to explore opportunities in franchising and know more about the possibilities, contact the Entrepreneur Authority today for a no-cost, no-obligation, no-pressure consultation or call 866.246.2884 to speak with one of our FRANtastic consultants.  You can also attend our free monthly webinar, “Franchise Ownership as a More Stable Career Path.” Just click on the link to register!