Information on the History of Franchising
Information on the History of Franchising
The word "franchise" or "franchising" has already created a buzz in the business world. There are thousands of companies worldwide who are franchising their business for optimum exposure of their brand. In fact, franchising is the single most successful marketing concept ever used worldwide for distributing goods or services to consumers.
The franchise business has been around a long time, but have you ever wondered how the concept of franchising came into being. First the word "franchise" is derived from the Anglo-French word meaning "liberty" or "privilege or freedom". The concept of franchising had to start somewhere. The origin of the concept dates back to 1850's.
Evolution of Franchising
During the 1840's, a major German beer brewer granted certain rights to some particular taverns to sell their beer by using the trade name SPATEN. This concept initiated the concept of franchising that became familiar to most of us in the twentieth century.
However, the credit of popularizing the concept of franchise opportunities goes to none other than Isaac Singer who invested the Singer Sewing Machine. Singer was looking for an innovative way to distribute the sewing machines manufactured by his company over a widespread geographic area. This is when he realized the benefits of franchise opportunities to market his products. Singer was also the first one to prepare franchise contracts. These documents then became the basis for the modern version of franchise agreements.
Franchising during late 1800's and early 1900's
Late 1800's and early 1900's was the time period when the concept of franchising became more popular as more and more companies started franchising their business. Mainly street car companies, oil refineries and auto manufacturers found that through franchising they can sell their products over a larger geographical area. During this time frame, some of the popular companies that began to franchise are other Kentucky Fried Chicken in 1930, Dunkin Donuts in 1950, Burger King in 1954, and McDonald's in 1955. These companies took the concept of franchise business to a whole new level by creating some of the best franchise networks in the world.
Franchising in the modern era
The present day concept of franchising became popular post World War II. After the conclusion of the war there was a huge demand for many products and services. Subsequently, to take advantage of the situation many more companies joined the bandwagon of franchising. This led to rapid expansion of franchising in the 1960's and 1970's. But during this time there were many companies that went bankrupted due to poor fund and management and this hugely affected the franchisees.
Such unfortunate events led to the formation of the International Franchise Association (IFA) and Federal Trade Commission (FTC) to regulate laws related to the franchising industry. In 1978, the FTC created the Uniform Offering Circular (UFOC) which was later renamed as Franchise Disclosure Document (FDD) in 2007. These documents made franchise companies to provide detailed information to potential franchisees and that too in written format. This really helped in making franchise business successful.
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