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OF FRANCHISING

The origins of franchising can be traced back to the middle ages (400 A.D.-1500 A.D.).  At that time, it was an accepted practice for local governments to offer important persons, even high church officials, a license granting them the right to maintain civic order and to make special tax assessments.  Courts or lords could also grant rights to others to operate ferries, hold markets, and perform the business activities today carried out by professionals and craft guilds.  The licensee (or franchisee) would pay the licensor (franchisor) a specific fund from the tax revenues collected or assessments made and in return receive military or other forms of protection.  

Queen Isabella of Spain probably used (invented) a franchising system when she awarded Christopher Columbus a "franchise" in 1492 to develop travel and trade with the new world.  It is fascinating that from the new world franchising would be introduced and reestablished in the 20th century. 

Additional progress was made during the early 19th century in England when tavern and pub owners, while experiencing financial hardship, turned to brewing companies for financial assistance.  The tavern and pub owners in return for financial assistance, were required to purchase all of their beer from that specific brewer.  Once again, the franchising system was an inaugurated even though the brewers did not regulate or restrict the tavern owners in any other way.  This method assured the brewers an outlet for distributing their products and allowed the tavern or pub owners to conduct their business any way they desired. 

In the United States franchising developed in the 1850's when the Singer Sewing Machine Company formed a franchise in 1851.  Singer had been experiencing difficulty in marketing its new product.  Singer needed to educate customers before they would purchase a "machine for sewing."  Because the sewing machine industry was in an infant stage of development, Singer did not have the necessary capital to develop a large sales force or to open a series of company branch offices.  Agents were then commissioned to demonstrate, sell, and repair the Singer line of sewing machines.  This was done through a franchise system.  Interestingly, once the sewing machine caught on, the company changed its marketing approach and began selling its machines exclusively through company owned stores during the 1860's.  

In the late 1800's a significant change occurred because of the industrial revolution.  Automotive manufacturers became involved in efforts to sell and distribute their products.  In 1898, William E. Metzger of Detroit because the first official franchisee of the General Motors Corporation.  General Motors, up to that time, had been selling directly to customers from assembly plants or through agents on a consignment basis.  The General Motors Corporation lacked the capital to open retail outlets.  Because of this, they began selling autos through their franchise system of dealers.  From that simple beginning, franchising has spread throughout the American economic system. 

Henry Ford followed the example of General Motors and, after establishing a mass production system for the Model T, he looked for an efficient mechanism for the distribution of the product.  The answer: franchising.  Henry Ford focused on establishing dealers in as many communities as possible throughout the United Stated.  His vision is the same as yours or mine.  The number of dealers would only be limited by the anticipated production levels of the Ford Motor Company.  Other franchises began soon after.  Rexall Drugstores began developing franchising in 1902 by Lewis Ligget.  Western Auto began franchising in 1909 by establishing dealership programs out of their company-based operation in Kansas City.  In 1925 Howard Johnson offered his three flavors of "superior" ice cream from his Wollaston, Massachusetts, drugstore.  His franchised ice cream business expanded to a group of restaurants of the east coast and in 1940 appeared on a turnpike followed by the first Howard Johnson Motor Lodge in 1954. 

The franchise boom did not begin until the early 1950's and probably the most famous franchising story occurred in 1955 when Ray Kroc started McDonald's by stressing quality, service, cleanliness, and value (QSCV).  It was that same year that Harlan Sanders also found his niche by establishing Kentucky Fried Chicken, and in 1959 the International House of Pancakes opened its doors and have sold countless millions of breakfasts since.

Franchising continues to grow and expand today.  It is one of the most unique business methods ever conceived or developed and provides the opportunities for both the parent headquarters organization and independent business people to join together in an effort to promote products, services, and receive profits.