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Franchising Industry Has History Behind It

Written by: Michael Hemenway

Article Overview: Franchising started as a process of granting privileges from the local sovereigns to carry out business. Gradually, it developed into a way of distributing finished goods. Then, the business turned into a full-fledged industry and acted as a safety net for the people. Various acts and the franchise associations brought some rules and regulations and the necessary professionalism into this field, which has now become one of the most stable pillars that is holding up the American economy.

Franchising Industry Has History Behind It

Franchising (in old French the term means privilege or freedom) started in the Middle Ages in Europe when the local ruler of the place granted privileges to hold a fair or operate a ferry. It gradually extended to granting permissions in order to brew ale and run taverns. It was like giving someone license to operate a monopoly business. The rules became a part of the European Common Law. The term franchising in the modern context was used first in 1851 when Singer Sewing Machine Company began granting distributorship rights to individuals. In the beginning, franchising was all about distributing finished goods, but the scene started to change when WWII veterans returned and settled down to raise their families. The resulting baby boom of 76 million births in America changed the business world and the face of franchising itself. As demand for all kinds of products and services increased, business format franchising (the kind that is popular today) was introduced and there was a rapid expansion of the fast food industry (which still is recognized as the most important franchise category).

But as with everything else, corruption soon entered this form of business too. Unscrupulous business owners duped people and ran with their money whereas financially poor companies provided franchise business for sale offers, but without the necessary infrastructure to support them. So, in order to introduce a proper system in the industry, the Federal Trade Commission introduced some rules and regulations in 1978. Accordingly, all franchise opportunities had to submit a written document called the Uniform Franchise Offering Circular or UFOC to the people who were inquiring about starting a franchise with them. The UFOC had to be submitted before any franchise agreement was signed and any money changed hand. The prime aim of submitting the UFOC was to make the franchisee know where he was getting into. The International Franchise Association was also formed to bring an aura of professionalism into an arena that was sometimes becoming very chaotic.

Today, franchising is an integral part of the American business scenario. It accounts for a business of over $2 trillion! This industry has more chance of succeeding than a stand-alone business. It is estimated that for every 12 new business that opens in the United States, 1 is a franchise business. With economic slow-down hanging over the market and corporate America downsizing, franchising is becoming the bread-and-butter earner for many households. The future also looks very bright for the people who wish for buying a franchise. The new FTC rule that will become compulsory by July 1st this year will make this line of business even more transparent and safe. There are some new categories that have immense potential such as the senior-care, handyman, child-education and pet-care industry. So, if you were toying with the idea of joining the franchise industry, start acting on it immediately. Browse through the website www.brandexpansion.com to get further details.

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Article Tags: baby boom, business format, distributorship rights, federal trade commission, finished goods, franchise agreement, franchise business, franchise category, franchise opportunities, international franchise association, necessary infrastructure, old french, prime aim, rapid expansion, sewing machine company, singer sewing machine, singer sewing machine company, uniform franchise, written document, wwii veterans



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Re: Re Franchise etc - [quote="bmueller47":e0j0nu4t]Can you see a shift of various types of franchises? What I am thinking about is that today it is more difficult to create franchises, that has great appeal. More and more people want to have their business, but no interference of someone else.[/quote:e0j0nu4t] Not sure what you mean exactly but it is certain that more and more people want to have their own business but not more and more people know what they really want to do, or how to do it. And that's what franchising is all about. Franchising is not for an entrepreneur. An entrepreneur will do his own thing. People who buy franchises want a turn key business, with a proven model. Franchising in the US had never been that good. I don't have the exact numbers in mind but I know for sure that franchising is growing more and more as people are getting more and more aware of this business model.
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Great Article, chock full of info. - Ian, Thank you for linking your article regarding Licensing vs Franchising. Its a good read.


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