History of Franchising
Franchising as a business structure that has been in existence in Europe since the middle ages. The system was different but had the same fundamentals. Land owners would grant rights to peasants, farmers and merchants to use their land in return for a fee. Modern franchising came about in the 1850’s with the Singer Sewing Company.
In 1850, Isaac Merritt Singer, examined The Lerow and Blodgett sewing machine and found that the machine was impractical because the needle moved in a circle. Eleven days and $40 later he had invented a sewing machine that’s needle moved up-and-down. In 1853, Singer began selling the machines for $100 each, but had difficulty selling his product because people didn’t know how to use it. His solution was to charge licensing fees to the buyers. They in turn they would build manufacturing plants, sell the sewing machines and teach the public how to use them.
What we know as modern franchising came onto the scene after World War II and the baby boom. In 1954, a milkshake salesman named Ray Kroc sold his five-spindled milk shake mixer, the Multimixer, to a hamburger stand owned by the Dick and Mac McDonald in San Bernardino, California. The mixers were so popular, the McDonalds asked Kroc to sell them to their other restaurants. Their other restaurants were growing rapidly because of the fast-paced production system that made more hamburgers at a lower cost. Kroc said yes, but in return he asked to join their organization and became the licensing agent to recruit franchisees. Kroc bought the organization from the McDonalds brothers in 1961. Since then, 30,000 local restaurants have opened to serve 52 million people, www.mcdonalds.com. Soon business owners began to see the success of McDonald’s franchising system and wanted to try it themselves.
As franchising grew, there was a need for legislation to govern the business practices. In 1978, The FTC’s law, "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures,” or the “Franchise Rule” was put in place. It required franchise owners to provide the UFOC to franchisees 10 days prior to the sale, according to www.ftc.gov. By the end of 1985, there were 500,000 franchise establishments in 50 industries, achieving gross sales over half a trillion dollars, according to the US Small Business Association. Franchises growth has only continued. The International Franchise Association (IFA) estimates now there are over 760,000 franchised establishments. Don DeBolt, former president of the IFA, said that franchising accounts for almost half of all U.S. retail sales in a January, 2005 article in Entrepreneur magazine.
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Franchising as a business structure that has been in existence in Europe since the middle ages. The system was different but had the same fundamentals. Land owners would grant rights to peasants, farmers and merchants to use their land in return for a fee. Modern franchising came about in the 1850’s with the Singer Sewing Company.
In 1850, Isaac Merritt Singer, examined The Lerow and Blodgett sewing machine and found that the machine was impractical because the needle moved in a circle. Eleven days and $40 later he had invented a sewing machine that’s needle moved up-and-down. In 1853, Singer began selling the machines for $100 each, but had difficulty selling his product because people didn’t know how to use it. His solution was to charge licensing fees to the buyers. They in turn they would build manufacturing plants, sell the sewing machines and teach the public how to use them.
What we know as modern franchising came onto the scene after World War II and the baby boom. In 1954, a milkshake salesman named Ray Kroc sold his five-spindled milk shake mixer, the Multimixer, to a hamburger stand owned by the Dick and Mac McDonald in San Bernardino, California. The mixers were so popular, the McDonalds asked Kroc to sell them to their other restaurants. Their other restaurants were growing rapidly because of the fast-paced production system that made more hamburgers at a lower cost. Kroc said yes, but in return he asked to join their organization and became the licensing agent to recruit franchisees. Kroc bought the organization from the McDonalds brothers in 1961. Since then, 30,000 local restaurants have opened to serve 52 million people, www.mcdonalds.com. Soon business owners began to see the success of McDonald’s franchising system and wanted to try it themselves.
As franchising grew, there was a need for legislation to govern the business practices. In 1978, The FTC’s law, "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures,” or the “Franchise Rule” was put in place. It required franchise owners to provide the UFOC to franchisees 10 days prior to the sale, according to www.ftc.gov. By the end of 1985, there were 500,000 franchise establishments in 50 industries, achieving gross sales over half a trillion dollars, according to the US Small Business Association. Franchises growth has only continued. The International Franchise Association (IFA) estimates now there are over 760,000 franchised establishments. Don DeBolt, former president of the IFA, said that franchising accounts for almost half of all U.S. retail sales in a January, 2005 article in Entrepreneur magazine.
