What is the origin of franchise?
The word “franchise” traces back to Middle English, where it denoted a grant of legal immunity. It is combined from the Old French word, franche ‘free,’ based on the franc; and the English word ‘frank,’ meaning honest or straightforward. The combined word as we understand it dates from the late 18th century.
Did franchising start in the Middle Ages?
The Middle Ages, as strange as it sounds, is where the business model of franchising started to appear. The Middle Ages weren’t a fabulous time to be a human. There were hundreds of famines—especially in Europe, a continent that lost a third (or more) of its population to The Black Death plague.
What is franchising and how does it work?
According to the History of Franchising as found on the BFA website, in feudal England, the Crown owned and controlled the land. The Crown would grant noblemen and the church the right to protect that land. In return, both the noblemen and the Church would be able to charge a tax for this protection, part of which would be shared with the Crown.
Is there an accurate history of franchising?
The History of Franchising is a fascinating topic with roots that go back far longer than most people realize. Although there is no single, comprehensive and authoritative work on this subject, there are a few reputable individuals and organizations that have worked hard to compile an accurate history of franchising.
What is meant by the term franchise in history?
: a right or privilege conferred by grant from a sovereign or a government and vested in an individual or a group; specifically: a right to do business conferred by a government. This meaning, dating back to the 1300s, evolved into three important modern uses of franchise: : the right to vote.
Who was franchising invented by?
Isaac M. Singer (1811-1875) gets credit for starting the modern use of franchising in the U.S. During the early 1850s, Singer, who had improved an existing sewing machine model, wanted to find a wider distribution for his product but lacked the money to increase manufacturing.
What is the evolution of franchising?
The roots of the word franchising can be traced back to the French word 'Franchise' which means to grant powers to a peasant or self. The English verb to 'enfranchise' also means to free from slavery bondage, legal obligation. In the middle ages, a franchise was a privilege or a right.
What is the history of franchising in the Philippines?
In the Philippines, where Business Format Franchising started in the 1970s (except A&W, who was earlier here), one of the first was again was “McDo”, who opened its first outlet in 1981.
When was franchising develop?
An early pioneer in service franchising was Arthur Murray® Dance Studios, which got its start in 1938. Franchising really took off as a form of business in the 1950s and 1960s, when many of the current large franchise chains, businesses such as Tastee-Freez®, KFC®, McDonald's, and Burger King®, were established.
What is the main purpose of franchise?
It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and trademark. Franchises are a popular way for entrepreneurs to start a business, especially when entering a highly competitive industry such as fast food.
What are the two main theories of franchising?
The findings show agency theory and signaling theory, and resource scarcity theory as the main perspectives used in studies about franchising, but other perspectives have been increasing its presence, mainly the institutional theory and resource based-view perspective.
What are the types of franchising?
The five major types of franchises are: job franchise, product franchise, business format franchise, investment franchise and conversion franchise.
What is agency theory in franchising?
Agency theory asserts that franchising is beneficial because it resolves the potential misalignment of interests between owners and managers. It is expected that the cost of monitoring a franchisee is less relative to the cost of monitoring hired managers.
When did franchising started to boom in the Philippines?
So in 1993, realizing the potential of franchising as a major economic growth catalyst for the Philippines, Lim and industry pioneers such as Jose T. Pardo and Vicente T. Paterno joined hands and held the country's first franchise expo.
What is the importance of franchising in the Philippines?
Years after, it is obvious that the franchise venture has a great impact on society, providing opportunities to Filipinos here and abroad. Today, franchising plays a crucial role in sustaining the country's economy by creating job opportunities, boosting consumption growth, and promoting tourism.
Why is franchise a successful business in the Philippines?
Independent business owners are likely to have higher investment costs to buy and operate their business, but they also have more control over the investment. Franchise business buyers typically have lower total investment costs but need to fulfill the obligations set by franchisors.
What's the biggest franchise in the world?
McDonald's Since its beginning in 1954, McDonald's has become the center that other fast-food franchises orbit around. Yet, the presence of so many imitators has done nothing to quell its global success. The company enjoys over $90 billion in global sales and represents the largest franchise network in the world.
Is McDonald's franchised?
McDonald's has been a franchising company since 1955 and has relied on its franchisees to play a major role in the system's success. Currently, about 95% of all U.S. restaurants are franchised to independent franchisees and about 5% are company-owned.
When did franchising started to boom in the Philippines?
So in 1993, realizing the potential of franchising as a major economic growth catalyst for the Philippines, Lim and industry pioneers such as Jose T. Pardo and Vicente T. Paterno joined hands and held the country's first franchise expo.
Is KFC a franchise?
KFC Franchise is owned by Yum! brands, global franchisor whose 3 restaurant brands, Pizza Hut, Taco Bell and KFC, are amongst the largest and most well-known franchises in the world. They are leaders in their respective industries - Pizza, Mexican and chicken. Yum!
What was franchising in the Middle Ages?
Local governments, typically medieval fiefdoms, granted high church officials and other wealthy landowners a license to maintain order and assess taxes on the surrounding population. These early franchisees paid a fee to the governments in exchange for protection, mainly from angry citizens who were forced to pay high tax rates. These “franchise” regulations eventually became part of European Common Law.
Who was the first franchise?
The first franchise in America is widely debated, but two individuals stand out from the rest as the likely frontrunners, although one view even traced American franchising history back to Benjamin Franklin, and the beginning of his printing partnerships in 1731.
What was the revolution in the automobile?
This meant that all these new machines, and their drivers, would need to purchase things along the way. Like gasoline and oil for the car. And food for the family as they traveled. Over time, gas stations and fast food enterprises began springing up everywhere.
What was the name of the brewery in Germany in the 1840s?
During the 1840s, a beer brewer in Germany with the brand name ‘Spaten’ granted rights to several local taverns to sell their beer. However, the tavern owners had to use the Spaten trade name. The tavern owners were essentially franchisees, because they had to pay for the right to use the trade name, which still exists today.
Where did the word "franchise" come from?
The word “franchise” traces back to Middle English, where it denoted a grant of legal immunity. It is combined from the Old French word, franche ‘free,’ based on the franc; and the English word ‘frank,’ meaning honest or straightforward. The combined word as we understand it dates from the late 18th century.
Is franchising a business?
Some have called franchising the greatest business model even invented. Whether or not you agree, you must admit that franchising history traces its roots far into the past. The concept, although not necessarily viewed as a business, was born early and has since flourished. A franchising history is an interesting study, and this brief panorama will provide the interesting highlights.
When did franchising start?
When anyone studies 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.
How long has franchising been around?
What they do not know is that franchising has been around much longer than they realize. Actually franchising has been around for over 1,000 years in one from or another.
Why did oil companies start opening gas stations?
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.
Who invented the sewing machine?
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.
Who was the first McDonald's franchise?
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 the 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.
Is franchising a good business model?
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.
When did franchising start?
Commercial franchising in the United States began in the Colonies, in Philadelphia, when on Sept. 13, 1731 , Benjamin Franklin and Thomas Whitmarsh entered into an agreement “for the carrying on of the Business of Printing in Charlestown in South Carolina.”
What is the evolution of franchising?
The evolution of modern franchising, created by the innovative companies and the pioneers that led them, is an exciting story . The future of franchising, energized by still unimagined new concepts, new business techniques and international expansion, promises to add yet more dynamic chapters to the continuing and growing opportunities in franchising.
How long was the Whitmarsh franchise agreement?
The term of the agreement was for six years; Whitmarsh was required to manage the business himself. He was responsible for the expenses of the business — all of the equipment ...
What is franchising in the Middle Ages?
And, while franchising is often thought of as a modern-day invention , its origins can be traced to the expansion of the church and as an early method of central government control before the Middle Ages. Historically, the purpose of commercial franchising was to allow workers or journeymen to establish their own businesses supported by franchisors.
How did the Church use franchising?
Franchising was used in England and Europe, where the Crown owned land and granted rights to powerful individuals, including the church, to manage its property. In exchange for these land grants, the noblemen and church officials were required to protect the territory by establishing armies, and were free to set tolls and collect taxes, a portion of which was paid to the Crown. The nobles divided the land among the local farmers who paid a royalty for the right to use the land either as a portion of the crops they grew or the animals they hunted. This system of governmental control existed in England until being outlawed by the Council of Trent in 1562.
What are the three constants that fueled the growth of franchising?
There have been three constants that fueled the growth of franchising: the desire to expand, the limitations on human and financial capital and the need to overcome great distances. And, while franchising is often thought of as a modern-day invention, its origins can be traced to the expansion of the church ...
Why did the oil industry start franchises?
As the automotive manufacturers solved their distribution challenges, the need to provide gasoline locally to fuel cars became critical. Lacking the capital required for purchasing real estate and establishing an adequate distribution system to meet the needs of the growing number of automobiles across the United States, the oil industry began to establish franchised dealerships at the turn of the century.
The History of Franchising
The Middle Ages
- When anyone studies 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 asses taxes. They also granted them rights ...
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 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 Turn of The Century
- 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. …
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.
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 the 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 a…
1970s to 1990s
- Franchising boomed in the late 1950’s through the end of the 1960’s. Through the 1970’s 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 1980’s and early 1990’s.
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.