LESSON 1: HISTORY OF FRANCHISING

The origin of the word franchise goes back to Anglo-French, meaning freedom,
liberty, and from Middle French, franchir, to free, and earlier from Old French franc,
free franchising has been around for over 1,500 years in one form or another

Franchising developed over time as an efficient way to do business and there

were versions of franchising employed in Europe centuries ago.

THE MIDDLE AGES

In the history of franchising, most people are not aware that the business model
of franchising actually started over 1,500 years ago in the Middle Ages.

It was during this period that local government officials would grant rights to high
church officials and other people of importance to assess taxes. They were also
granted the right to maintain order. These first “franchisees” were allowed to set up
markets and do other forms of business. They paid a royalty to the lords in exchange for
protection among other things.

THE COLONIAL PERIOD

During the colonial period, local lords would give permission to people of
importance to set up markets, run the local ferries, and even hold and manage fairs.
They even allowed them to hunt on their land. Kings would use the same concept and
grant rights to “franchisees” to pursue various business activities. These “franchisees”
would then pay a royalty to the King for protection.

THE 1840S

A German brewing company called “SPATEN” granted rights to local tavern

owners to sell their beer and use their brand name. The tavern owners paid the
company to use their brand name in their establishment. This is really what
franchising is about is it not?
Franchisees in today’s modern franchises basically do the same thing which is
pay to affiliate themselves with and use the brand name.
Molts- ingr. in beer made by Duque of barbaria
 THE 1880S

Mr. Isaac Merrit Singer who is the founder and inventor of the Singer sewing
machine was the father of modern-day franchises. Mr. Singer would find people in
geographical areas and grant them licenses to sell the sewing machine. These
licensees paid for the right to sell the sewing machines. As part of their agreement with
Mr. Singer, they even had to teach people how to use the sewing machine.

THE TURN OF THE CENTURY (THE LATE 1800S)

At the turn of the century, automobiles were beginning to sell. Automobile

manufacturers needed a way to distribute their cars. One of the methods they used to
distribute automobiles to more people was through auto dealerships. In 1896 William
Metzger opened the first automobile dealership in Detroit Michigan. As car sales
grew, so did the number of automobile dealerships. This gave auto manufacturers a
network of franchises to sell their automobiles which helped to greatly increase sales.
Ford Modelty- first invented car

THE EARLY 1900S

As more people purchased automobiles and roads were being developed, oil
companies began opening gas stations all along the new roads. Many of these
were franchises. As the highway system continued to grow, restaurants also popped up
everywhere along these new roads. It didn’t take long before many of these restaurants
started franchising.
Standard Company- successful oil company way back then by Mr. Rocky
Filler Davidson in New York, Ohio, etc.

THE 1960S

Ray Kroc, the man who would eventually become the originator of the modern
franchise, opened the first McDonald’s franchise in 1955 in Des Plaines, Illinois,
and founded McDonald’s System, Inc. This later became McDonald's Corporation. Kroc
bought out the McDonald brothers for $2.7 million in 1961 and took the company to over
500 restaurants in just 8 years. Today there are over 34,000 McDonald’s restaurants.
The McDonald’s franchise system has paved the way for the modern franchises we see
Today.
Richard and Maurice McDonald- the brothers of McDo
 THE 1970S TO 1990S

Franchising boomed in the late 1950s through the end of the 1960s.
Through the 1970s franchising had issues because franchisors lost focus on
supporting their franchisees. Plus, there were also misrepresentations by some
franchisors. After a period of cooling and oversaturation, the franchise model began to
make a comeback in the late 1980s and early 1990s.

2000 AND BEYOND

The franchising business model continues to change and adapt to demand. The
concept of multi-unit franchising and multi-brand franchising has changed the way
franchisees operate their businesses. The history of franchising is an amazing and
exciting story. We believe that franchising will continue to be the best business model
for many years to come.