Where Franchising First Started
While there were earlier forms of licensing and distribution agreements, franchising, as a business concept, started to take shape in the US around the late 1800s.
The Singer Sewing Machine Company was one of the earliest examples of franchising. The company began offering licenses to independent dealers which allowed them to sell and service Singer sewing machines in different areas across the country and this strategy allowed Singer to rapidly expand its market reach.
It was not until the 1950s that franchising started to become a well-established business model and began to gain widespread popularity. During this time notorious franchised businesses such as McDonald's and KFC began to expand rapidly across the US and the world, setting the stage for the global franchising industry we see today.
The standardised systems, branding and operational procedures that were all developed during this time are now common in the franchising world. Franchising experienced significant growth and development in the 1950s and 1960s for several key reasons:
Post-War Economic Boom: In the 1950s the US benefited from a period of economic prosperity. This post-World War II economic boom crafted the perfect conditions for business expansion, which included franchising. As a result of people having more disposable income and the desire for convenient dining and retail options, the growth of franchise businesses exploded across the nation.
Standardisation: Franchisors like McDonald's and KFC developed detailed operating manuals and procedures to ensure the consistency of customer experience and product quality across all franchise locations. This method ensured standardisation which made it easier for new franchisees to replicate the success of the original business.
Entrepreneurship and Opportunity: The franchising model presented an opportunity for aspiring entrepreneurs. They would be able to own and operate their own businesses with the support and guidance of an already established brand. Franchising allowed entrepreneurs to venture out into the world of business ownership whilst still enjoying the security of a proven business concept.
Advertising: During the 1950s the television became a dominant form of entertainment for households across the US. With this, TV advertising become an incredibly important avenue for brands to showcase their products and services. Franchisors made the most of TV advertising to promote their brands nationally, thus reaching a much broader audience. Iconic ad campaigns, like McDonald's "You Deserve a Break Today", helped attract customers across the nation.
Legal Framework: Franchise agreements and regulations were developed to protect both franchisors and franchisees alike. With the growth of franchising as a business model, the Federal Trade Commission (FTC) eventually developed rules and regulations that governed franchising. This provided legal stability to the industry, which in turn attracted even more entrepreneurs looking to explore the franchising model.
Successful Role Models: The success stories of early franchisors like Ray Kroc (McDonald's) and Colonel Harland Sanders (KFC) became influential examples of what was achievable through franchising. Their success encouraged other entrepreneurs to explore franchising as a business model.