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Franchising 101
History
of Franchising
Franchising has been in existence for a long time. In
the 1850’s, the I. M. Singer & Co. inadvertently created
the first embryonic franchise network in an effort to
distribute and sell its sewing machines to a
then-skeptical public. Despite its early roots,
franchising did not truly come of age until the late
1950’s and the decade of the 60’s. Before that, only
automobile manufacturers, soft drink bottlers, and
gasoline companies used franchising on a regular basis
as the prime vehicle for marketing and distributing
their goods, with one major exception. In the 1930’s, in
the midst of the Depression, Howard Johnson established
a chain of 25 Howard Johnson roadside stands licensed to
franchisees.
In the 1950’s and 60’s Holiday Inns, Roto-Rooter, Dunkin
Donuts, McDonald’s, Burger King, H & R Block, Lee Myles,
Midas, 7-Eleven, Dunhill Personnel, Baskin-Robbins,
Wendy’s, Kentucky Fried Chicken, Pearle Vision Center,
and Sheraton geared up and franchised.
Beginning with those chains and continuing today with
franchise networks, two hallmarks may be identified; a
trademark and a uniform product or service. The Big Mac
tastes the same in Maine as it does in California; the
restaurants look the same in Arkansas as they do in
Toledo; and the name outside is always the same around
the globe.
Franchising promotes uniformity. A primary benefit for
an entrepreneur who acquires a franchise is that he/she
does not need to “reinvent the wheel” and in the process
make mistakes that are hard to correct. Starting a
business can be an expensive and a daunting step.
Following someone else’s proven system and methods, and
using their brand name by acquiring a franchise, has for
many been the best solution for becoming one’s own boss
and succeeding.
There are three basic types of franchises:
1. Distributorships, such as auto dealerships (Toyota,
Ford, Mercedes, etc.), which grant the right to sell
their parent company’s product(s).
2. Trademark or brand name licensing, which give the
licensees the right to use the parent company’s
trademark or brand in conjunction with the operation of
their own businesses. Examples include beverages
(Coca-Cola) and sports franchises (Miami Dolphins and
New York Yankees).
3. Business format franchises, the type most people are
familiar with (Subway, Meineke, Maid Brigade), are the
focus of this website.
Click Here to learn more about the Uniform Franchise
Offering Circular.
Click Here to learn franchise industry terminology. |
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