The History of Franchising in the United States
How, Where and Why It All Began
Franchise History
Franchising
in the United States started in the 1850's just after Isaac Singer invented
the Singer Sewing Machine. During his search for an effective and
affordable way to distribute his product for his company, the Singer Sewing
Center, Singer ran into problems that prevented his company from becoming
successful.
His first problem was a lack of capital for manufacturing his machines. Secondly, no one was willing to buy his sewing machines without first being taught how to use them, which required effort that most traditional retailers could not provide. Singer's solution was to charge licensing fees to business people who would own the rights to sell his machines in certain geographical areas. They would also be responsible for teaching consumers how to use his machines, thereby creating sales opportunities. Using the licensing fees to fund manufacturing, he was then able to afford to build his machines and then ship them directly to his newly formed distribution network.
As the United States became more industrialized in the late 19th century, national brands and nationally known vendors came into being and reworked the American economic landscape. Supply followed demand: as economies of scale and consumer demand for uniform products merged, more and more national chains appeared. 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, with one major exception, 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. The exception was Howard Johnson. In the early 1930's, in the midst of the Depression, he established a chain of 25 Howard Johnson roadside stands.
In the 50's and 60's, however, the franchise giants appeared. Holiday Inns, Roto-Rooter, Dunkin Donuts, McDonalds, Burger King, H. & R. Block, Lee Myles, Midas, 7-Eleven, Dunhill Personnel, Baskin-Robbins, Wendy's, Kentucky Fried Chicken, Pearle Vision Center, Sheraton -- they all geared up and franchised out. Beginning with those chains and continuing today with franchise networks, two hallmarks may be identified: a trademark and a uniform product or service. Most people still assume that the McDonald's Corporation actually owns all McDonald's restaurants. In reality, though, most McDonald's restaurants are owned by independent franchisees. Yet, 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. The public demands uniformity and, through franchising, gets it.
