by Andre Sanchez

According to the Oxford Dictionary the origin of franchises, with respect to the etymology of the word, lies in the French ‘franche’ meaning free. However, the original use of the word in the English language referred to the granting to citizens a right to vote.  It then became used in the sense of a company granting another the right to sell its products or services.

The first recorded origins of franchising as we know it is that of eighteenth century English brewers allowing others to sell their products in public houses, or ale houses as they were known then, as long as the brewers’ names were shown with the ales.  Not only was the sale of the products allowed, since prior to then each ale house would brew its own ale, but also the company name.  Yes it was that long ago - franchising was first attempted over 200 years ago!

This was extended in Germany in the 1840s when taverns were granted the exclusive rights to sell the products of certain breweries, and also to use the brewery name.  It can be argued that this was the first true franchising since prior to that inns and taverns could not sell a brewer’s product by name unless it were their own.  These rights were granted by the breweries and may even have been paid for by the taverns, which were guaranteed a regular supply of ale.  The taverns got the ale and the breweries got the advertising.

The first business to offer franchises in the United States was the Singer Sewing Machine Company in 1851 – yes, it was that long ago. Although the first effort was not successful, possibly due to an ignorance and distrust of this marketing technique, Isaac Singer sought a means of improving the distribution of his latest improved sewing machine models.

He offered a written franchise agreement for $100 since he did not have the capital to manufacture large numbers of his machines and realized that purchasers would have to be trained how to use the machines.  Although a few people tentatively tried it, it did not take off as a marketing technique. Isaac was well ahead of his time.

John Pemberton used the method in his marketing of Coca Cola, this time more successfully, and other early examples at the beginning of the 20th century include Western Union, who offered franchises to individual telegraph operators and the start of automobile dealerships, where the dealers purchased franchises to sell specific makes of car with the stocking, supply and servicing of the dealerships being provided by the manufacturers.

Howard Dearing Johnson was the first person to start restaurant franchising in 1935, and his franchise empire grew to 150 restaurants by 1941.  He saw a need for curbside and freeway restaurants and realized that he could not finance the idea himself.  He therefore sold franchises to finance his restaurant empire, offering the name, products and logo to be used in exchange for a fee.  William Rosenberg, founder of Dunkin' Donuts, stated Johnson as his role model in the franchise industry. 

It was not until after the Second World War that franchising really took off in the United States. Petroleum companies offered distributor franchises to individual gas stations to sell their gas, and distributorships in the auto industry started to explode.  It became evident that with rapidly increasing of automobiles to individuals that the companies themselves could not meet the need and that a network of franchises was required to cover the whole country.  The gas companies came to the same conclusion with the fuel needed to run them

The capital for their retail outlets was provided by individual dealers and the oil companies offered franchise deals to stores and car mechanics round the country to open their own gas stations and garages.

It was with the food services, however, that modern franchising as we know it today started to boom.  This started in 1919 with self service restaurants, but did not explode until Ray Kroc purchased the McDonald’s franchise rights, and built one of the most successful companies in American history, and certainly the fastest growing franchise business.

Ray Kroc’s model was copied by hundreds of other similar companies and what till then were small businesses. No American town is without several of these fast food franchises, whether they specialize in pizzas, donuts, lobsters, Mexican or chicken and ribs, they are everywhere and most are doing well. McDonald’s, however, is still the most successful world-wide restaurant franchise and a model for any would be company requiring tips on how to start up their own franchise empire.

Since the days of the origin of franchises, the old breweries in 1700s England, this method of marketing slowly developed until the 1950s then rocketed to astronomic proportions.  The only amazing thing about this is why it took 200 years for the potential to be noticed and taken advantage of in the restaurant business by a simple ice cream maker with one store: Howard Dearing Johnson.

The Origin of Franchises was originally published at http://www.businessmannow.com