One can say that the history of franchising goes back to the middle ages when working-class folks paid a royalty to high church officials in exchange for business ownership. Medieval lords granted rights to small business owners to carry on commercial ventures, and this concept gained momentum in the colonial period as well.
What initially started as a royalty program to gain the protection of the “monarchs,” eventually evolved into the franchising model of the 1800s. Today, franchising is much more than granting the rights of a business. Successful franchisor models who have stood the test of time are integral for boosting the economy and supporting entrepreneurship.
The Early Days of Franchising
1731:
Probably the earliest example of franchising in the United States was when Benjamin Franklin entered into a “co-partnership” deal with Thomas Whitmarsh for carrying out the printing operations at a local printing shop in South Carolina, under the care, management, and obligations of Franklin. Records show that Franklin entered into similar agreements in North Carolina, Jamaica, Kingston, Georgia, Britain, and Canada.
The 1800s:
By the mid-1800s, U.S cities had started granting monopoly “franchises” to private utility companies for water, gas, sewage, and electricity. In 1898, General Motors Corporation sold its first franchisee dealership to William E. Metzger of Detroit, Michigan. A year later, Coca-Cola licensed selected people to bottle and sell their beverage, which is one of the most successful franchising deals in the United States.
The most notable franchising deal was implemented by the I.M Singer and Company in the 1850s, to distribute their sewing machines. Singer’s sewing machines were popular due to their efficiency. They granted exclusive rights to the licensees who were selling the product to every household, carrying out the training operations, which resulted in high repurchasing orders.
The 1900s:
With the turn of the century, many businesses expanded their operations by granting business ownership to franchisees. In 1902, Louis K. Liggett started a “drug cooperative,” famously known as the Rexall Drugstore.
With the transition from an agricultural to an industrial economy, America became the birthplace for many legendary franchise chains, the most famous being McDonald’s. The 1900s saw many early franchisors who are now industry giants and responsible for a significant part of the country’s economy. Most well-known names are Kentucky Fried Chicken, Arthur Murray Dance Studio, Dairy Queen, Dunkin Donuts, Burger King, Wendy’s, Holiday Inn, etc.
With time, manufacturers licensed individuals to sell automobiles, gasoline, trucks, beverages, and a variety of other consumer products, and franchising has become an attractive business model for entrepreneurs who are looking to transition in between their career options.
The modern franchising model is still tweaked and updated to adapt to the economy’s highs and lows. The model works because it benefits franchisors, franchisees, and customers alike. Franchising provides franchisors with capital, creates distribution channels, and establishes brand identity. At the same time, it offers would-be entrepreneurs a platform for business ownership, with the help, guidance, and motivation of someone who knows how to run a successful business.
Franchising is alive and well in 2020 over 300 yrs later. People continue to reach their dreams of owning their own business. If you would like to learn more please feel free to email me at rich@thefranchiseconsultingcompany.com or call me at (224) 678-9212.
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