The concept of franchising is a couple of centuries old. The
franchising business and world economies have developed simultaneously.
The term 'franchise' comes from old French where it meant freedom, or
privilege. Franchising goes back to the feudal times when the feudal
lords granted permission to their slaves and common men to hold fairs,
markets, ferries, and even allowed hunting on their lands.
In
the middle ages, kings used the concept of franchising when they gave
contracts, or franchises for most of the commercial activities like
developing roads, wells, and brewing ale.
As the concept of
franchising developed further, it was seen as the right to monopoly that
a person got to perform any kind of a commercial activity. As time
passed, several franchises became a part of the European Common Law.
Singer
Sewing Machine Company is considered to be the father figure of
franchising as most of the concepts of franchising developed by them,
form a part of modern day franchising contracts.
The way in which
Singer made its sales and provided services is considered to be modern
retailing that is a part of franchising. In the 1850s, Singer brought
together teams of salesmen and dealers who were given the rights to
distribute sewing machines in different regions. They made written
contracts for franchising, which are the basis of modern-day franchise
agreements.
At this point in time franchising was seen as the
right granted by the manufacturer to sell and distribute products and
service to the franchisee. Big oil refineries, automobile manufacturers,
and many others also started following the concept of signing written
agreements for franchisee distribution.
Proper business format
franchising came into being, in the United States and other countries of
the world, after World War II. This was the time when soldiers returned
from the war to be back with their families and the baby boom took
place because of which different and newer products and services became
essential.
This was when the concept of franchising developed the
most. It made its presence felt in the U.S. economy. This was also the
time when most of the hotels and motels developed. With the increase in
the number of franchises, the 60s and 70s saw a time when every second
person was into the franchising business.
The decades of 60s and
70s also brought about a number of frauds in the franchising business.
There were people who duped many others by taking money from them in
return for a franchisee that did not exist and escaped with the money.
On the other hand there were also many franchise businesses that went
bankrupt. This was when the need for strict regulations for franchising
business was given a thought.
In the year 1978, the Federal Trade
Commission ordered that all the franchisers/manufacturers were supposed
to submit the Uniform Offering Circular or UFOC before receiving money
from the prospective franchisers. The UFOC provides the details of the
franchise company, gives their history, audited financial statements,
information of the officers, and the contract, or the franchise
agreement.
At present, the franchising is seen as the most lucrative business option for many people who aspire to own a business.
