Ally BandemerMrs. TilleryNovember 15, 20113rd Period History of Franchise Franchise has been a frequently practices way of business since the beginning ofthe 1800s, and perhaps even earlier than that. It is difficult to approximate the exact datefranchise became an authentic way of business because people have been practices itstactics before it was officially accepted. Since the beginning, there has been manydifferent forms of franchise. However, the road to modern franchise has been difficultand controversial. The word “franchise” is from “Old French „franc‟ free; a special right or privilegegranted by the government to an individual, group, or business entity” (dictionary.com).Franchise has come to define how many businesses operate. A corporate business istypically one that has many chains of businesses throughout the country, or sometimesthroughout the world. Many times it can be difficult for one person to oversee so manybusinesses. In this case, franchisees are hired. A franchisee is a person who is granted aprivilege to share in owning a certain piece of the business. The business owner must beable to trust the franchise to help keep the business profitable and pleasurable tocustomers. In this way, the franchise benefits greatly because his or her only concern is tocarry on what other people have metaphorically constructed. An early form of franchisebegan as individuals who owned breweries and wanted their ales to be well known.“During the 1840‟s several German ale brewers granted rights to particular taverns to
market their ale. This is the beginning of the type of franchising that became familiar tomost of us in the twentieth century” (Daszkowski The History of Franchise). In earliertime periods, travel was difficult and many people would not be able to stop by specialtybreweries very often. Consequently, brewers sold their ale to other taverns or markets,therefore spreading the product and attracting new customers. Moreover, the markets andtaverns needed to make money as well; the same ale was sold at different prices,according to the tavern owner. These techniques that the brewers used are commontechniques that are executed by many franchise businesses today. However, at this time,franchise was not an official business type, and was not thought of as a revolution. Peddlers were also common around this time period, and a few are still aroundtoday. Peddlers are people who set up their market on the street and sell a business‟sproduct to virtually anyone. “You are a peddler if you go uninvited if you go house tohouse, place to place, or street to street to sell goods” (What is a peddler). Peddlers havecontributed to franchising because a person other than the original maker sells aspecialized product. In addition, that product is spread to consumers who found difficultypurchasing it due to distance or lack of free time. This type of franchising is not ascommon today due to the accessibility of travel, nevertheless it served as a conveniencefor many Americans in the late 1800s. Howard Johnson was a man who was among the first businessmen to beginaccepting franchise as a beneficial marketing technique. “In the early 1930‟s, in the midstof depression, he established a chain of 25 Howard Johnson roadside stands” (A BriefHistory); however, he did not allow his entire business to become franchise. AlbertSinger is the first recognizable person to start a business solely on the concept of
franchising. Singer paved the way for many people with his sewing machine company.Singer thought about franchise as a way to better sell his product; “he was looking for anefficient method of marketing his sewing machines across the United States, he bagan togrant other the right to sell his sewing machines” (Davis The History of Franchising).Soon after Singer started his company, oil companies and car companies beganfranchising because they could surmise from his success that franchising their ownbusiness was worth the risk. Even after car and gas companies began franchising, the fadturned into a new way of life for Americans. Without a doubt, there was a major problem with business owners allowing somuch responsibility into someone else‟s hands. In nature, the more humans have, themore they want. When inexperienced people were trusted with so much responsibility,they took it for granted and ignored the fact that franchising is a partner-based business,“you‟re in business for yourself, not by yourself” (Franchising). In addition, somecompanies were poorly managed or under-funded. When so many businesses begandying out due to simple mistakes, the government knew immediately that a change mustoccur; otherwise there could be potential risk to America‟s economy. In reaction to this,Congress made a law for corporations and franchisees to sign a Franchise DisclosureDocument (FDD), “The purpose of the FDD is to protect the public by providinginformation about the franchise company” (Basics – The Franchise DisclosureDocument). This document is a mere representation of the corporation‟s authority and thefranchisee‟s knowledge of that authority. The FDD altogether is meant to reduce theamount of faults and failures that occur while the franchisee is in charge.
While these companies were beginning to test out franchising in America, manycitizens were frightened and skeptical about the way it would change America‟s economyand the pre-set routine of buying and selling products. According to John Milton Fogg, inhis excerpt from People‟s Franchise, “all of those negative things were being said anddone about franchising. And yes, there was even a move in Congress to outlawfranchising.” More specifically, Fogg says that people saw franchising as a way ofplummeting the American economy. Many people thought there was no way such aconcept like this could be successful in America‟s government. In contrast to theirthoughts, there has been much more success than failure in franchising over the past sixtyyears. Generally, fast food industries and small companies have been involved infranchising in order to become successful. More specifically, “McDonald‟s has alwaysbeen a franchising company and has relied on its franchisees, our Owner/Operators, toplay a major role in the System‟s success” (McDonald‟s Restaurants Franchise). Manycan see that American have misunderstood the benefits of franchising becauseMcDonald‟s is clearly a successful business. Even more so, other fast food restaurantshave made a great success as being franchises as well, such as Subway, “at the end of, Subway had 33,749 restaurants worldwide, compared to McDonald‟s 32,737”(Jargon Subway Runs Past McDonald‟s Chain). As previously stated, more and morebusinesses began turning to franchise because of the success rate. “In the late 50s and60s, the giants appeared. Holiday Inns, Dunkin Donuts, McDonald‟s, Burger King, H. &R. Block, 7-Eleven, Backin-Robins, Wendy‟s, Kentucky Fried Chicken – they all gearedup and franchised out” (A Brief History). Once business owners began seeing the
potential output for franchises, entrepreneurs found franchising as a way of makingbusinesses better. The franchise also has the opportunity to make more money if he or sheis involved in a famous business, “franchising is a great way to make money, especiallywhen you are the owner of a franchise that is well known” (The Pros of Franchising). To conclude, the history of franchise and its tactics have been long debated adthought upon by many common citizens, political scientists and, naturally, businesspeople. In the end, franchise is a huge risk but offers huge potential rewards.
Works Cited“Basics - the Franchise Disclosure Document.” Franchise.com. N.p., n.d. Web. 17 Nov. 2011. <http://www.franchise.com/franchise-news/Basics_UFOC_info.cfm?newpage=true>.Daszkowski, Don. “Franchising.” About.com. N.p., n.d. Web. 17 Nov. 2011. <http://franchises.about.com/od/franchisebasics/a/history.htm>.Davis, Denise T. “The History of Franchising.” Ezinearticles.com. N.p., n.d. Web. 17 Nov. 2011. <http:/http://ezinearticles.com/?The-History-of-Franchising&id=2018994>.Fogg, John Milton. “The People‟s Franchise.” N.d. PDF file.“Franchise.” Dictionary.com. Ask, n.d. Web. 17 Nov. 2011. <http://dictionary.reference.com/ browse/franchise>.Franchiserout.co. N.p., n.d. Web. 17 Nov. 2011. <http://www.franchiseroute.co.uk/franchise- articles/article-3.html>.“Franchising.” Wdfi.org. N.p., n.d. Web. 17 Nov. 2011. <http:/http://www.wdfi.org/fi/securities/ franchise/history.htm>.Grossman, Norman. “Franchising - in Business for Yourself Not by Yourself.” Bmmagazine.com. Business matters, n.d. Web. 17 Nov. 2011. <http://www.bmmagazine.co.uk/franchising-oportunities.98>.Jargon, Julie.Wsj.com. Wall Street Journal, n.d. Web. 17 Nov. 2011. <http://online.wsj.com/ article/SB10001424052748703386704576186432177464052.html?mod=e2tw>.“Peddlers, solicitors, and transient merchants.” Cityofprescott.net. City of PrescottFinance Dept., n.d. Web. 17 Nov. 2011. <http://docs.google.com/viewer?a=v&q=cache:rTu6XBqoLLYJ:www.cityofprescott.net/_d/peddler.pdf+what+is+a+peddler&hl=en&gl=us&pid=bl&srcid=ADGEESixB-