"Franchising" Essay

1968 words - 8 pages

Entrepreneurs all around the globe have dreams of starting their own business. Throughout the last few decades franchising has grown tremendously, becoming one of the most popular ways for people to make their entrance into the business world. As the concept of franchising has evolved over the years, investors have become more aware of the advantages it possesses. With so many business opportunities available, it is important to understand what makes franchising so appealing to investors.The road to understanding why a person would choose to invest in a franchise rather than using an alternate business route begins by learning about the history of franchising and how it has evolved over the years. "Throughout its long history, there have been three constants that have fueled the growth of franchising, the desire to expand, the lack of expansion capital and the need to overcome distance" (whichfranchise.org). The original meaning of the word Franchise stems from the Old French meaning privilege or freedom. In the middle ages kings and lords used franchising as a way to grant privileges and rights and as a way to control commercial activity. They would grant rights to run markets and fairs, for building roads and even brewing ale. Over time, as the world evolved, the concept of franchising began to take on new meanings.The idea of product franchising was developed as far back as the 1840's, when German ale brewers began granting franchises to local taverns. The franchises gave the taverns the "exclusive rights to sell their ale" (franinfo.com). Franchising began to represent the more modern meaning, which represents a way of distributing goods and services. One of the first known franchising efforts to take place in the United States was accomplished in 1851 by Issac Singer, the founder of Singer Sewing Machine Company. With the desire to increase the distribution level of their products, the company began granting franchises in states all across the US to sell and service their sewing machines. Singer created written franchise contracts which have created a model for franchise agreements used today. Within two years of its franchising efforts, Singer became the top manufacturer and distributor of sewing machines in the United States (singerco.com).Up until the beginning of World War II, the franchising industry continued to evolve. It made its way into the restaurant, hotel/motel, automotive, and oil industries; but the greatest growth in franchising took place once the war was over. Advancements in transportation and the increased mobility of Americans created a great new need for all types of products and services. Business format franchising, the most dominant form of franchising today, was on the rise. Rather than simply granting the right to sell and service a product, business franchising "transfers a total way of doing business that has been developed by the franchisor" (entrepreneur.com). The franchisor gives the right to the franchisee to...

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